Expert Observes Improvements In Terror Modeling
NU Online News Service, April 7, 4 :03 p.m. EST?Modeling for terrorism events, since the Sept. 11, 2001 U.S. attacks, has improved to predict secondary effects such as disability and eventual cleanup costs, according to one expert.[@@]
David Lalonde, senior vice president at CAT-modeling firm AIR Worldwide, gave that assessment recently in an appearance before the Casualty Actuarial Society's annual Ratemaking Seminar in New Orleans.
Mr. Lalonde said there has been a sea change in terrorism modeling, with new models going beyond measuring just physical damage and expanding to include potential injuries, loss of life, disability, and contamination and cleanup costs following potential terror attacks.
The Sept. 11 events, he said, were "a wake-up call in terms of managing accumulations of exposure across multiple lines of business. And now insurers and reinsurers are taking a much broader view of catastrophe risk in addressing the financial exposure of possible future attacks."
There has also been a continuing improvement in the level of detailed data being collected in terrorism modeling, said Mr. Lalonde. The new terrorism models, he said, emphasize the importance of examining all potential exposures, the types of weapons terrorists might use?including conventional as well as chemical, biological, radiological and nuclear weapons?and their potential targets.
Results from these terrorism models can show annual aggregate losses as well as the annual occurrence losses on an industry-wide and company-specific basis, Mr. Lalonde said.
He added that terrorism modeling can help insurers get a complete picture of a terror event?however unlikely?that could devastate their financial results. The modeling also establishes underwriting guidelines to offer profitable coverage while controlling risk, and provides a better understanding of reinsurance needs, according to Mr. Lalonde.
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