A new model by Risk Management Solutions (RMS) avoids the prediction approach, focusing on the way we communicate with each other to determine terrorist success rates.
The manner in which we network with each other is "a law of human existence," said Gordon Woo, a catastrophist with RMS, at the catastrophic risk management firm's annual terrorism seminar in New York City. This factor is universal and constant, Woo said.
Related: Read AA&B's July cover story, "Connect and evolve with agency technology."
In using this social networking analysis--and after finally having enough data following the 9/11 attacks on the World Trade Center--Woo developed a formula to calculate terrorism success rates, and therefore an insurance loss likelihood, based on the number of suspected terrorists involved in a plot.
The conclusion is good news for insurers. The more people involved in a terrorist plot, the better chances to stop terrorists because of how authorities now monitor social networking, connecting one terrorist with another suspect, then another.
According to the RMS U.S. Terrorism Risk Model for 2011, the insurance industry can expect a 12 percent drop in annual insured losses next year compared with this year. Since Sept. 11, 2001, there have been 33 known terrorism plots, with six being intercepted within the last 12 months.
The median premium rate for terrorism coverage fell $37 per million of total insured value in 2008, to $25 per million last year, according to Marsh.
Due to efforts leading to more interdiction, terrorism risk has stabilized at less than $1.5 billion for 2011.
The model could also not discount the risk associated with chemical, biological, radiological or nuclear weapon (CBRN) attacks. Intelligence points to an interest by terrorist groups to acquire CBRN weapons but that has yet to occur.
