BRUSSELS—The European Commission has approved Denmark’s plan to provide a state guarantee of insurance coverage for losses from terrorist attacks that exceed certain thresholds.

Under the plan that the commission approved Wednesday, domestic and foreign nonlife insurers that provide coverage in Denmark for nuclear, biological, chemical or radioactive terrorist attacks will be liable for claims up to the threshold. The Danish government will provide a guarantee of coverage for the next 15 billion Denmark krone ($290.7 million) of losses above the threshold, which currently is set at 5 billion Denmark krone ($969 million).

The threshold will be reviewed each year and could change depending on the amount of terrorism coverage available in the Danish market, the commission said in a statement.

Insurers will pay a fee for the coverage, which currently is 0.15% of the guarantee amount. Denmark will recover any payouts under the guarantee through policyholder levies over time.