Standard commercial property insurance typically excludes damage caused by terrorism. This cover fills that gap, backed by a unique UK government-supported reinsurance scheme. Here's how it works, and why it exists.
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Terrorism insurance fills a gap that most standard commercial property policies deliberately leave open.
Terrorism insurance in the UK works differently from most other commercial cover, thanks to a government-backed mutual reinsurance scheme.
Pool Reinsurance Company Limited was established in 1993 by the UK government and the insurance industry, following major terrorist bombings in London that led standard insurers to withdraw terrorism cover from commercial property policies.
Pool Re acts as a mutual reinsurer for its member insurers, backed by a guarantee from the UK government — meaning if a terrorism loss is large enough to exhaust Pool Re's own resources, the government stands behind the scheme.
Originally focused on fire and explosion damage, the scheme was extended in 2018 to include non-damage business interruption — recognising that a nearby terrorist incident can disrupt trading even without physical damage to your own premises.
Premiums are typically rated according to postcode risk zones, reflecting that city-centre and high-profile locations carry different risk levels to suburban or rural premises.
While any business can buy this extension, it tends to matter most for certain types of premises.
Businesses in major city centres or financial districts, where risk-rating tends to be higher.
Substantial commercial property assets where an uninsured terrorism loss could be financially severe.
Iconic buildings, major retail centres, or venues that could be considered higher-profile targets.
Premises hosting large numbers of the public, where business interruption exposure is significant.
A few things worth checking before you buy, whichever UK insurer or broker you compare.
Check that your insurer is a Pool Re member insurer, since this is how the government-backed reinsurance arrangement actually applies to your policy.
Make sure the terrorism extension's sum insured matches your main property sum insured — a mismatch can leave a gap in cover.
Confirm whether the 2018 non-damage extension is included, particularly relevant if your premises are near other high-profile sites.
Before buying, confirm any insurer or broker is authorised and regulated by the Financial Conduct Authority — check the register at register.fca.org.uk.
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