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Management Strategies

10:41 AM
Nathan Golia
Nathan Golia
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Should We Treat Terror Like Other Catastrophes?

The parallels between the past 24 hours in New York and the days immediately preceding Irene show how, in big cities, terror attacks seem to be viewed as an inevitability, for which insurers can model and prepare.

Last night, as I was watching the Packers-Saints game, Mayor Bloomberg broke in with a press conference announcing that the city had received "specific, credible, but unconfirmed" information about a potential terrorist attack this weekend. Reports indicate that the threat is car or truck bombs (for more information, see The New York Times).

The conference reminded me of those not long ago, as the Eastern Seaboard prepared for Hurricane Irene, anxious to avoid another Katrina situation. The message of those press conferences was simple: This storm is coming, and it's in our best interests to prepare. Of course, these things are unpredictable, and the worst effects of Irene (and its encore, Tropical Storm Lee) are actually being felt hours from the city.

The whole ordeal begs the question, though: Should we treat terrorist attacks like earthquakes, hurricanes, and other natural disasters, as inevitabilities that can be modeled?

Risk Management Solutions (RMS, Newark, Calif.) believes so. In a paper on terrorism risk in the post-9/11 world, the company states:

One of the most contentious components of terrorism risk modeling is the estimation of attack frequency. Many risk managers consider models incapable of estimating the number of major terrorist attacks in any given period of time, as human actions are impossible to forecast. RMS considers frequency modeling to be not only possible, but necessary for managing terrorism risk.

Because terrorism isn't a natural occurrence (semantic and philosophic discussions aside), we would like to believe it can be prevented in the way a storm or quake can't. Unfortunately, this isn't a view that insurers can take: When you're in the business of managing risk, it's incumbent to take into account all possible risks — including the most frightening. If terrorism can be modeled, insurers certainly will be interested.

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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