Terrorism Exclusion – Property (NMA 2920/2921)

Purpose

Following attacks such as those in 2001, terrorism became a distinct, difficult-to-model accumulation risk in many property markets. The property terrorism exclusion consistently removes losses arising from terrorist acts from the base cover so that this risk can be priced separately and, where appropriate, reinsured through government-backed pools or standalone terrorism policies.

Effect and limits

The exclusion removes cover for loss, damage, cost and expense of any kind directly or indirectly caused by, or connected with, an act of terrorism, or with measures taken to control, prevent or suppress it – regardless of any other cause contributing concurrently or in any sequence to the loss. “Terrorism” is typically defined broadly as the use or threat of force or violence by any person or group for political, religious, ideological or similar purposes, including an intention to influence a government or to put the public in fear. The burden of proving that a loss falls outside the exclusion rests with the policyholder – a notable departure from the usual allocation of the burden of proof for exclusions. NMA2921 is the version adapted for reinsurance contracts.

Negotiation and practice

Because the exclusion is a standard feature of property policies, it is worth checking whether, and to what extent, separate terrorism cover (often placed through government-backed pools or London market capacity) is needed, particularly for exposed locations or assets with high symbolic value. The broad definition and reversed burden of proof make careful review of the exact clause wording at claims stage particularly important.