Insurance-industry experts are cautioning that the death ofOsama bin Laden does not represent the end of the terrorism threatfor the United States. The threat, in fact, may worsen ifterrorists seek to execute a reprisal attack.

And while there was somedifference of opinion among experts about what bin Laden's deathmeans for the terrorism-insurance market, all agreed that the eventshould not lull Congress into believing that the need for theTerrorism Risk Insurance Act (TRIA) is in any way reduced.

President Obama announced last week that the much-sought-afterleader of Al Qaeda was killed in a military operation in Pakistan,where U.S. intelligence had tracked him down in a sprawlingcompound in Abbottabad.

Ben Tucker, senior vice president, Property Specialized RiskGroup of Marsh, says bin Laden's death is not expected to have animmediate impact on the terrorism-insurance market.

For years now, bin Laden has been considered a figurehead behindthe movement, not involved in actual operations. In fact, factionsof the terrorist movement have acted independently for years in theform of, among others, Al Qaeda Arab Peninsula concentrated inYemen and Al Qaeda in Islamic Magreb, operating in NorthAfrica.

With that in mind, Tucker says bin Laden's death has nooperational value to the movement.

However, he notes that the death could spawn reprisal attacks,which would quickly change the terrorism-insurance market. “Thereis no short, immediate impact, unless there is a sudden increase inthe threat lever,” notes Tucker.

Robert Hartwig, president of the Insurance Information Institute(I.I.I.), says demand for insurance to cover terrorism risk—and theappetite of commercial insurers to write it—could grow followingthe killing of bin Laden.

“While everyone hopes this will reduce the threat,” Hartwigsays, “we are now being told that there is actually an enhancedpotential.”

Simultaneously, the insurance industry—which once excludedterrorism risk from commercial policies after 9/11—could eventuallyfind a new confidence to write in the most at-risk areas now thatbin Laden is gone.

“It depends on the perception of this event, whether there is anincrease in the willingness to write from property and casualtyinsurers and reinsurers,” says Hartwig, who co-authored a terrorisminsurance report with Claire Wilkinson, vice president ofGlobal Issues at the I.I.I., last month.

While one can speculate on the impact bin Laden's death willhave on the commercial-insurance industry, “no interpretation canconclude the Terrorism Risk Insurance Act is obsolete. That wouldbe a mistake,” Hartwig continues.

He notes that commercial coverage of terrorism risk after 9/11only returned when Congress enacted TRIA late in 2002.

“The industry is generally satisfied, it is a successfulprogram, and it costs taxpayers nothing,” Hartwig says.

Nevertheless, TRIA—which established a partnership that allowsthe federal government and the insurance industry to share lossesin the event of a major terrorist attack—has been heavilyscrutinized. According to the I.I.I. report, President Obama'sbudget plans included a scaling-back of support for the program,now called TRIPRA after the Terrorism Risk Insurance ProgramReauthorization Act of 2007 extended the program for the secondtime.

Wendy A. Peters, senior vice president, Willis TerrorismPractice, says in an e-mail that Congress “must not have theknee-jerk reaction that [bin Laden's death] signals the end of theneed for the federal insurance backstop as it is only when insurershave collectively agreed to re-assume this peril in their policiesthat the government can withdraw its vital support.”

Gordon Woo, a catastrophist with Risk Management Solutions(RMS), says the industry must remain on guard. During RMS's annualterrorism seminar in New York last year, Woo outlined a formula he developed to calculate terrorism-successrates, and therefore insurance-loss likelihood, based onsocial-networking analysis—a method used by federal investigatorsand intelligence agencies.

“Insurers should be able to understand that the process isworking,” Woo says. “There is a method to it. There is no luckinvolved.”

Regarding bin Laden, Woo notes, “What is of particular interestis how he met his downfall. No one today lives entirely on theirown.”

Woo says bin Laden tried diligently to avoid the Internet andelectronic communication, but the Central Intelligence Agencyzeroed in on those who communicated with the outside world for themastermind of the World Trade Center attack nearly 10 yearsago.

Reportedly, operatives focused on one particular courier. Fouryears ago they learned of his name, and two years ago the courierwas tracked to the compound in Pakistan where bin Laden was hiding.On May 1, U.S. forces killed bin Laden during a 45-minutefirefight.

The criticism of calculating terrorism risk was the perceptionthat analysts could not predict human behavior. As it turns out, noone needed to.

Social-networking analysis has been “very effective” since 9/11,Woo says, in foiling numerous terrorism attacks. In addition to itsfirst priority of keeping America safe, the tactic has “protectedinsurers from paying large losses,” he adds.

Business in the U.S.—insurers included—need to stay on the alertfollowing the death of bin Laden, Woo says.

“The key is vigilance,” he says. “We cannot predict theinspirational value he's had. Clearly this is a blow to[terrorists], but there can be a continuation of plots—a numberattempting to get revenge in some way.”

Woo points to statements made by President Obama immediatelyafter he confirmed bin Laden was killed.

Bin Laden's death “does not mark the end of our effort,” thepresident said. “We must and we will remain vigilant at home andabroad.”

In the United States, stand-alone terrorism coverage capacityhas increased with some new entrants such as Hiscox and Beazley,while major insurers such as Chartis remain writers of thecoverage.

The Lloyd's market also continues to see growth.

Capacity stands at $1.5 to $2 billion per risk, possibly as highas $3.5 billion. However, Manhattan remains “most challenging”because it is considered a high-profile target and maximumavailability runs at $750 million to $1.5 billion for stand-alonecoverage.

The biggest market for terrorism coverage remains TRIA, whichexpires in 2014.

Tucker says the stand-alone market for terrorism coverage has“grown considerably” in the United States, but some multinationalcorporations may want to re-examine their international exposure inlight of recent events. Any international terrorism coverage shouldbe coupled with political-violence coverage for events stemmingfrom unrest in the region not related to terrorism, he says.

In those regions of instability, he says brokers have seen“incredible demand” for the coverage and rates have hardened ascapacity has contracted.