Terrorism exclusion clause
A clause removing losses caused by an act of terrorism from the policy, generalized after September 11, 2001, which French law nonetheless prohibits in property insurance and which public schemes fill in.
The terrorism exclusion clause removes from cover damage caused by an act of terrorism, most often defined as the use or threat of force or violence by a person or group, for political, religious or ideological motives, with the aim of influencing a government or intimidating a population. After September 11, 2001, reinsurers removed terrorism from their treaties, and primary insurers excluded it in turn, often through the NMA 2918 market form, which pairs war and terrorism and contains so-called anti-concurrent wording: the exclusion applies regardless of any other cause contributing to the loss, concurrently or in any sequence. That wording shifts the debate from the main cause to mere contribution, which considerably extends the exclusion's reach. The effect is limited by national law. In France, article L. 126-2 of the Insurance Code requires contracts covering property damage to cover attacks and acts of terrorism, which makes the exclusion ineffective and underpins the GAREAT pool. Elsewhere, public schemes such as Pool Re or TRIA make cover available by reinsuring the risk the market excludes.
September 11, 2001 cost insurers between 30 and 40 billion dollars at the time, depending on the estimate, for a risk none of them had priced. In the following months the terrorism exclusion became the rule in most markets, until TRIA was adopted in the United States in November 2002 to make cover available again.
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