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Boston Marathon Bombing's Implications for Insurance

The attack introduced new risks into social life, which will ultimately affect risk management, security measures and insurance.

The bombing at the Boston Marathon was egregious as an attack on civilians not only going innocently about their business but actually doing good. This atrocity has created a new degree of risk into activities not considered threatened before. By doing so, it requires a response from the insurance industry to help manage that risk.

Preparing for a Marathon is a colossal work of individual improvement and the majority of runners were running for causes. As reported by John Hancock, the Boston Marathon Charity Program, now in its 25th year, was expected to raise more than $11 million dollars this year.

Obviously the most important objective for all concerned is to reduce the danger to all exposed to such hazards. Consequently, we are likely to see the implementation of many new security measures, as we did in the aftermath of the September 11, 2001 attacks, according to Robert P. Hartwig, president of the Insurance Information Institute.

"The event hasn't yet been classified formally as an act of terrorism, and there's a further question of whether it could be foreign or domestic terrorism —and all of these distinctions matter," Hartwig comments. "This will have an immediate effect on next week's London Marathon, and it will have significant implications for how security and risk is managed, perhaps including from an insurance perspective."

Hartwig notes that there was unrestricted access to the Marathon route, and that it's very difficult under the security conditions that prevailed yesterday to notice an individual with a backpack who may pose a threat. His observations were direct, as his son Jordan participated in the race and he himself was in attendance. Jordan Hartwig was one of the runners participating in charitable fund-raising, as a member of the Syracuse ROTC who ran in Army gear weighing 45 lbs. to benefit injured combat veterans. The Hartwigs had retired from the scene of the impact about an hour before the explosions occurred.

The Wall Street Journal reports that:

The tally of those injured in the bombings increased to 176, with 17 in critical condition and three dead, police said. Among those killed was 8-year-old Martin Richard of Boston's Dorchester section. His mother and sister were seriously injured.

Hartwig characterizes the Boston Marathon as a "soft target," as distinguished from airports and high profile office buildings with security measures that are harder for terrorists to breach. The attack therefore has risk management, underwriting and loss control implications for similar events, entertainment venues and other roughly analogous places where people gather.

While the Boston Marathon attack will inevitably change how we think about the risks associated with such events, it remains an outlier statistically, insists Stuart Rose, global insurance marketing manager at SAS. Insurance generally works by taking vast amounts of available information to predict the frequency of certain types of events. Statistically rare events, such as yesterday's attack are essentially unpredictable, he implies.

However, while yesterday's attack was statistically an anomaly, it nevertheless affects various kinds of risks associated with property, liability and of course life and health, Rose stresses. "The concept of terrorism has to be taken into account into pricing, and as more of these occur, they have to be factored in," he says. "It's another piece of analysis that will go into modeling.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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