White House Urges Security Incentives From Insurers

By Steven Brostoff, Washington Editor

NU Online News Service, Jan. 21, 4:39 p.m. EST, Washington?The insurance industry has an important role to play in the nation's war against terrorism, one that goes beyond economics, a senior White House official said today.

Richard Falkenrath, special assistant to the president for homeland security, said that the White House hopes the insurance industry will help provide incentives for property owners and other insureds to adopt prudent security measures.

Speaking at conference on the Terrorism Risk Insurance Act of 2002, which was sponsored by the Washington-based American Insurance Association, Mr. Falkenrath said that one reason the White House expended a great deal of effort to get the legislation enacted is the hope that the insurance industry will establish incentive-based systems aimed at enhancing security.

It is not much different, he said, than insurance companies providing discounts to homeowners who invest in alarm systems.

One of the major policy goals of the administration, Mr. Falkenrath said, is to prevent terrorist attacks. While the administration is working with private sector industries on security issues, he said, it is impossible for the government to address all concerns.

The insurance industry, he said, can assist the effort by encouraging policyholders to take prudent measures to reduce their vulnerability to attack.

In addition to providing incentives for security, the White House is hoping the insurance industry will find ways of assessing the probability of an attack, he said.

Mr. Falkenrath noted that he realizes this is a very difficult task. Terrorism, he said, is a strategic phenomenon, not a statistical one.

Terrorists, he said, plan their attacks in a time, place and manner of their own choosing. Terrorism is not the type of risk that lends itself to statistical analysis, contrary to other catastrophic risks, he said.

Nonetheless, Mr. Falkenrath said, the insurance industry must find a way to put a number on it.

"It is not an easy problem, but it is one you must solve," he said.

The administration also hopes that the insurance industry can help the new Department of Homeland Security apply risk management techniques to industries vulnerable to terrorist attacks, he added.

Mr. Falkenrath noted that the threat of terrorism remains very real. While the United States dealt a serious setback to al-Qaida terrorist group, it is still alive and kicking, he said.

Indeed, Mr. Falkenrath said, the capabilities of al-Qaida and other terrorist organizations are significant and will grow with time.

It is a fact of life, he said, that the means of mass destruction are becoming ever more accessible.

The United States, he said, is particularly vulnerable because it is an open society with large population centers that rely on a limited number of critical infrastructures.

In addition, he said, many potential terrorists are unknown. He cited Timothy McVeigh, who was convicted of the Oklahoma City bombing, as an example of a terrorist who came out of nowhere.

That is why, from an insurance standpoint, the administration believes it is in the country's best interest for all areas of the economy to be insured against loss and to have incentives to adopt prudent security measures, Mr. Falkenrath said.

Special Reports /

White House Urges Security Incentives From Insurers

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