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Terrorism Insurance in the UK: what is it?

In 1992 after the Baltic Exchange Bomb in London the Government decided to no longer cover the cost of Terrorist incidents from state funding and in 1993 formed a joint venture Insurance Company (Pool Reinsurance or commonly known as “Pool Re”).

After this insurers started to change how Terrorism was covered for in their policies, with the big event being the 911 terrorist attack in New York. Since then most insurers have changed this as a separate item.

Insurers now collect premiums for Pool Re and pay claims arising from acts of Terrorism.

The cover from Pool Re is on an “All Risks” basis and applies if the cover has been purchased and the incident is deemed to be an act of Terrorism by the Government.

Pool Re aren’t the only Terrorism Insurance provider, other schemes are underwritten at Lloyds and are generally cheaper as they have a higher excess (usually £1,000) and the cover does not include chemical, nuclear or biological terrorist attacks.

Do I need Terrorism Insurance?

The main reasons are the practical and financial issues of being homeless but still with a mortgage for a property you cannot occupy or afford to repair, especially with the added cost of having to rent alternative accommodation.

In the period from 1993 to 2018 Pool Re has paid out more than £600 Million in claims.

Things to consider: –

  1. Potential targets locally.
  2. Being on a flight path.
  3. Who lives or owns properties in building.
  4. Mortgage Lenders are aware of Terrorism Insurance and may not grant a mortgage if Terrorism cover is not in force causing a sale/purchase/re-mortgage to fall through.
  5. A property is usually peoples most asset and Terrorism Insurance offers protection for this.

Court Ruling

Upper Tribunal (Lands Chamber) in the case of QDIME LTD v (1) Bath Building (Swindon) Management Company Ltd and (2) Various Leaseholders – June 2014.

The Judgement reinforced the relevance of Terrorism cover it deemed the word explosion in the Council of Mortgage Lenders Handbook includes explosions caused by Terrorism and therefore should be covered to satisfy the requirements of lenders.

 

Notes:-

  • Terrorism Insurance can be insured with Buildings cover or separately at Lloyds.
  • Both Pool Re and Lloyds policies are acceptable to Mortgage Lenders.

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