Insurers refuse liability for third-party threats in wake of 11 September

The wording of terrorism clauses within motor policies are in disarray as insurers attempt to implement exclusions to keep reinsurers happy.

Head of product management for AA Insurance Services Kenton Bush said since 11 September, there have been different ideas about wordings in motor policies.

Bush said the AA's view is that a car must always be insured for damage, but in its policies, terrorism cover now excludes third-party liability, only offering cover up to the minimum amount demanded by law. He said property damage is limited to £250,000 - the minimum amount stated in the Road Traffic Act [1975]. "Accidental damage is unaffected by terrorism as this is not the concern of reinsurers," he said. "Reinsurers are more concerned about third-party involvement."

Norwich Union's director of underwriting John Seaton said Norwich Union has also only applied exclusions for third-party damage. "Under the Road Traffic Act [1975], the user of the vehicle has to insure for third-party risks," he said. "The only change we made here is to restrict cover for damage to property to £5m. In some cases, it was previously unlimited."

Fortis Insurance Limited has not been so generous and now imposes terrorism exclusions across the board.

Fortis Insurance underwriting director Paul Chaplain said: "We have excluded all loss, damage, injury or legal liability caused directly or indirectly by acts of terrorism, except as necessary to meet the requirements of the Road Traffic Act. We have had to limit the cover we can offer in relation to terrorism risks following restrictions in cover provided by our reinsurers."