Terrorism Insurance (Terrorversicherung)

Concept

Terrorism insurance covers property damage, business interruption losses, and in some cases bodily injury losses caused by acts of terrorism – that is, acts of violence committed with the aim of influencing, threatening, or intimidating a government or population. Because of the potentially catastrophic and statistically hard-to-predict magnitude of losses, terrorism risk is frequently excluded from the standard terms of property insurance and must be purchased separately.

Market Structure and Government Involvement

Because individual private insurers and reinsurers are often unable to bear the potentially enormous accumulation losses of a large-scale terrorist attack on their own, many governments have established special pools or government-backed reinsurance programs that serve as backstop capacity for terrorism risk and support the private insurance industry in providing cover.

Distinction from War and Civil Commotion

Terrorism insurance must be distinguished from war insurance and cover for civil commotion, since each gives rise to different exclusion and inclusion provisions in policy conditions; the precise definition of terrorism, and its delineation from sabotage, riot, and war-like conditions, is regularly the subject of carefully drafted clauses intended to avoid coverage gaps or unwanted duplicate coverage.