NU Online News Service, July 16, 1:00 p.m. EDT
NEW YORK–The criticism in calculating terrorism risk had been the perception that analysts could not predict human behavior, but a new approach by Risk Management Solutions (RMS) avoids the factor altogether, 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, said Mr. Woo.
"We don't need to know what you are talking about, we just need the telephone numbers" to begin connecting the contacts – or creating networking spider webs – for suspect terrorists to get tangled, Mr. Woo said.
In using this social networking analysis – and after finally having enough data following the 9/11 attacks on the World Trade Center – Mr. 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. Authorities have only about a quarter-chance to stopping one man from carrying out a plan but the chance of it causing much insured loss is minimal. See the recent attempted bombing at Times Square.
The more people involved in a terrorist plot, the better chances they have of being stopped because of how authorities now monitor social networking, connecting one terrorist with another suspect, and then another. And according to the evidence, it appears a group of plotters are needed to carry out a large attack worthy of causing major insured loss.
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 to this year. Since Sept. 11, 2001 there have 33 known terrorism plots, with 6 being interdicted within the last 12 months.
Less frequency of major successful attacks results in a take-up rate for terrorism insurance higher than in the immediate years following 9/11.
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, said Weimeng Yeo, senior analyst with RMS. But RMS sees no signs terror attempts will diminish. In fact the tempo may increase and the face of terrorism has changed as more attempts appear to be plotted by homegrown individuals or groups.
The model could also not discount the risk associated with chemical, biological, radiological or nuclear weapon (CBRN) attacks, Mr. Yeo explained. Intelligence points to an interest by terrorist groups to acquire CBRN weapons but that has yet to occur.
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