Terrorism Insurance for UK Businesses: Pool Re, NBCI, and What You Need to Know

Terrorism is a risk that most UK businesses do not think about systematically — until they are directly or indirectly affected. The 7/7 London bombings, the 2017 Manchester Arena attack, and numerous other events have demonstrated that terrorism risk in the UK is not merely hypothetical. The financial consequences for businesses near an incident — even those not directly targeted — can be severe and prolonged.

The UK has a sophisticated and somewhat unusual terrorism insurance infrastructure, anchored by Pool Re — a government-backed reinsurance mechanism that has underpinned the market since 1993. This guide explains how the UK terrorism insurance market works, what has changed since 2019 with the introduction of non-damage business interruption cover, and what businesses need to consider when assessing their terrorism exposure.

A Brief History: Why Pool Re Exists

Following the IRA bombing campaigns of the early 1990s — particularly the 1993 Bishopsgate bomb and the 1996 Manchester bomb — commercial insurers began withdrawing terrorism cover from standard property policies. The potential losses were simply too concentrated and too large for the commercial market to absorb without government backing.

Pool Re was established in 1993 as a mutual reinsurer backed by a HM Treasury guarantee, designed to ensure that terrorism cover remained available in the UK commercial market. Member insurers can access Pool Re's reinsurance capacity, passing on terrorism-related losses to the pool (and ultimately to the government as backstop).

The arrangement works as follows: a UK business buys commercial property insurance from a conventional insurer; the insurer includes a terrorism extension (or the business buys it separately); when a terrorism claim arises, the commercial insurer pays the claim and then reinsures the loss through Pool Re.

Pool Re now covers the vast majority of commercial property in the UK — broadly, any UK commercial property with a commercial insurer that is a Pool Re member can benefit from the scheme. The HM Treasury guarantee means that, however large a terrorism event, Pool Re can continue to pay claims.

What Pool Re Covers: Physical Damage

Pool Re's original and primary coverage is physical damage to commercial property caused by a terrorism event.

The key trigger requirement is that the cause of loss must be an act of terrorism as defined under the Pool Re rules and the Reinsurance (Acts of Terrorism) Act 1993. Broadly, this means acts of persons acting on behalf of, or in connection with, any organisation which carries out activities directed towards the overthrowing or influencing by force or violence any government de jure or de facto.

The standard terrorism perils include:

• Fire following a terrorist bomb or incendiary device
• Explosion damage from a terrorist bomb
• Damage from a vehicle as a weapon (vehicle-ramming attacks)
• Damage from biological, chemical, nuclear, or radiological (CBRN) attack (with some limitations)

What Pool Re does not cover in the physical damage context:

• Losses not caused by physical damage (but see NBCI below)
• Third-party liability (Pool Re covers the insured's own property, not liability to others)
• Motor vehicles

Non-Damage Business Interruption (NBCI): The 2019 Extension

The most significant recent development in UK terrorism insurance was the introduction of non-physical damage business interruption cover (NBCI) by Pool Re in 2019.

Prior to NBCI, terrorism business interruption cover was only available if the business suffered physical damage. A business forced to close because it was within a police cordon around an attack, or because a nearby street was closed for weeks during a counter-terrorism investigation, received no business interruption cover unless its own premises were physically damaged.

NBCI changes this. Under NBCI-extended policies, business interruption losses can be claimed even without physical damage to the insured premises, provided:

• The loss arises from an act of terrorism (Pool Re definition)
• The business interruption is caused by a response to that act (police cordon, government closure, evacuation order)
• The cover is triggered by the relevant government response (typically a declaration by a specified authority)

This is highly significant for businesses in city centres, tourist areas, high footfall retail, and hospitality — precisely the businesses most affected by the "cordon effect" of terrorist incidents. A restaurant forced to close for two weeks while a police cordon remains in place around a nearby attack can now claim under NBCI-extended cover, even if the restaurant itself is undamaged.

How to Access Pool Re Cover Through Your Commercial Insurer

Pool Re cover is not accessed directly — it sits at the reinsurance level. To obtain Pool Re-backed terrorism cover, you need to:

1. Purchase a commercial property policy from a Pool Re member insurer — most major UK commercial insurers (Aviva, RSA, Zurich, AXA, QBE, etc.) are Pool Re members
2. Request a terrorism extension — terrorism cover is typically not included automatically in standard commercial property policies; it must be specifically requested and will attract an additional premium
3. Confirm NBCI is included — not all terrorism extensions automatically include NBCI; confirm with your insurer or broker whether your policy extends to non-damage business interruption

The cost of terrorism cover through Pool Re is modest relative to the exposure — for most commercial properties, the terrorism premium is a small fraction of the main property premium. However, it should be explicitly confirmed and not assumed.

Standalone Terrorism Insurance

For businesses with unusual risk profiles, very high values, or specific concerns, standalone terrorism insurance is available from Lloyd's and other specialist insurers outside the Pool Re framework.

Standalone terrorism policies may offer:

• Higher property sub-limits than the Pool Re-backed extension
• Broader definitions of covered events
• CBRN cover on broader terms
• International locations (Pool Re only covers UK premises)

For businesses operating internationally, standalone terrorism cover from Lloyd's syndicates with political violence expertise is the appropriate vehicle for non-UK locations.

Cyber Terrorism: A Separate Product

Pool Re does not cover losses caused by cyber terrorism — terrorist attacks delivered through cyber means (malware, ransomware, infrastructure hacking). This is increasingly important given that critical national infrastructure and major businesses are potential targets of state-sponsored or terrorist cyber attacks.

Cyber terrorism insurance requires a separate cyber insurance policy with explicit terrorist/state-actor coverage. Many standard cyber policies exclude losses caused by state-sponsored attacks (sometimes called "act of war" exclusions). The Merck vs ACE Insurance case (US, 2021) and the Mondelez vs Zurich case highlighted how courts and insurers are interpreting these exclusions in the context of the NotPetya attacks — which were attributed to Russian state actors.

If your business has significant cyber exposure, review whether your cyber policy covers state-sponsored and terrorist attacks or excludes them.

Personal Terrorism Cover for HNW Individuals

Standard home and personal insurance policies typically exclude losses caused by terrorism (fire, explosion, and structural damage to residential property). For HNW individuals with high-value homes in areas of elevated terrorism risk (central London, other major cities), confirming whether terrorism cover is available and purchased under the home policy is worth checking.

Pool Re's mandate extends to some residential property in specific circumstances, but broadly the market for residential terrorism cover is smaller and the terms more variable. Specialist HNW home insurance from Chubb or AIG may include terrorism cover as part of the programme.

For personal safety — kidnap, ransom, and extortion risk — see specialist K&R cover, which addresses terrorism risk from a personal security rather than a property damage perspective.

Key Actions for Business Owners

1. Confirm your terrorism cover is explicitly in place — do not assume it is included; check the terrorism extension in your commercial property policy
2. Confirm NBCI is included — if you operate in a city centre, high street, or tourism-dependent area, non-damage business interruption is as important as physical damage cover
3. Review international locations — Pool Re only covers UK risks; international locations need separate cover
4. Consider cyber terrorism — review whether your cyber policy responds to state-sponsored/terrorist attacks or excludes them
5. Review the business interruption period — if a major terrorism event were to affect your area, how long could business interruption last? 12 months? 24 months? Confirm the indemnity period is adequate
6. Review third-party liability — Pool Re does not cover your liability to third parties injured in a terrorism event at or near your premises

This guide is for general information and does not constitute insurance advice. Pool Re coverage and policy terms are subject to change. Consult your commercial insurance broker for advice specific to your business.

How Global Investments Can Help

For business owners and property investors with significant UK commercial property exposure, terrorism insurance is a gap that should not be left unaddressed. Our advisers can help you confirm whether your existing commercial property insurance programme — including Pool Re membership, terrorism extension, and NBCI — is in place and adequate for your exposure.

For international property and business interests, we can help you assess the terrorism risk landscape in the relevant markets and connect you with specialist brokers who can place appropriate cover. Contact us to review your position.