Strategic surprise is a precious weapon in terrorist campaigns.Al Qaida managed to achieve this spectacularly on 9/11. Since then,counterterrorism efforts have been improved considerably, bothwithin the American homeland and abroad. The result of thismuch-heightened state of alert: Out of dozens of significant jihaditerrorist plots against the Western Alliance, only a very few havenot been interdicted. 

Whether it is procuring or improvising weaponry, undertakingsurveillance or testing an attack plan, specialist training andexpertise within a terrorist team are needed for a plot to have areasonable degree of success. Furthermore, the execution of acommando-style plot, such as hijacking or sabotage, would require asizable group of assailants. But any major plot has a good chanceof being stopped—the more ambitious the plot, the more guys who areinvolved, the greater is this chance. Too many terrorists spoil theplot.

Indeed, since 9/11, the only successful plots against theWestern Alliance have involved improvised explosive devices andsmall arms. The development of technically sophisticated plotsusing innovative weapons, such as those of mass destruction, isoptimally fostered within safe havens, which have been militarilydenied to Al Qaida since 9/11.  

Social Networks & Single-ActorSociopaths

Every human being, including a terrorist, has a social networkof contacts, both in the real world and online—which can lead to acommunication intercept, a link to an informant or a tip-off. Theaggregate social network of members of a terrorist cell provides anexpanding target for intelligence penetration. 

However, even in Western countries with the most effective andwell-resourced counterterrorism services, catching lone-wolfterrorists is difficult and haphazard. With a minimal socialnetwork of plotters, the chance of interdiction may only be 1 in 4.Accordingly, in February 2010, then-CIA director Leon Panettareckoned a lone-wolf event to be the principal terrorist threatfacing the United States. 

The amount of harm a lone wolf can cause depends on the ambientlevel of security. As a peaceful, tolerant society, the level ofsecurity had been kept purposely low in Norway. A tragic price waspaid for this on July 22, 2011, when a terrorist attack was mountedby a right-wing Islamophobe, Anders Breivik. 

The surprising scale of Breivik's attack took advantage of theterrorism-risk blindness of a country lacking any notable terrorismexperience. In the more terror-prone and security-focused UnitedStates or the primary countries of Western Europe, if a group ofconspirators were to acquire several tons of fertilizer and test afertilizer bomb, their activity would likely come under the closescrutiny of the security services. In 2004, for example, fiveterrorists were caught in the U.K. stockpiling a ton of fertilizerand planning bombing raids in and around London.

LESSONS FOR TERRORISM UNDERWRITING

Accumulation risk control in any region of the world always hasbeen a mainstay of terrorism underwriting. With the imposition ofstrict underwriting limits in specific regions, the amount ofterrorism cover to write should be risk informed. 

In particular, it is important for underwriters to appreciatetheir implicit reliance on counterterrorism capability to controlterrorist activity: Terrorism underwriters are essentially coveringthe financial risk of any failure of government security services.In a country such as Pakistan, where the intelligence service isutterly compromised, attacks can occur on a daily basis. But in theWestern Alliance, attacks occur as just the occasional failures ofthe defensive process of attack interdiction. 

In these Western countries, the allocation of governmentresources toward protecting their citizens against terrorism issubstantial. This expenditure is warranted because Western citizensare especially averse to being victimized by wanton acts ofterrorism. There is minimal public tolerance for the failure tointerdict terrorist attacks. This heightened risk aversion is ahuman behavioral trait that drives loss mitigation,counter-balancing the psychopathic behavior of terrorists seekingto maximize loss. The likelihood of any individual falling victimto a terrorist attack is very low, and Western governments aremandated by their electorates to ensure it stays this way.

When President Bush appointed Tom Ridge as the first head of theDepartment of Homeland Security, he told him not to let 9/11 happenagain. He didn't, and no major attack has happened since. Thecommercial prospects for terrorism underwriting in the comingdecade depend crucially on the resolution, skill and expertise ofsecurity leadership being vigilantly maintained.