Tag Archives: Terrorism

Western Jihadists & the Risk They Pose to their Homeland

Since the start of the Syrian civil war in 2011, foreign jihadists from across the globe have travelled to Syria to fight the Assad regime. According to a report by the 9/11 commission, the civil war in Syria has attracted around 10,000 foreign fighters from more than 80 countries. A growing number of these foreign fighter contingents have also returned to Iraq determined to reignite sectarian tension in the region. While the majority of non-Syrian fighters are Middle Eastern, the influx of European, American, and Canadian born fighters is significant. A study done by the International Centre for the Study of Radicalisation at King’s College London on the number of foreign fighters in Syria found that 18% are from the West. Britons make up one of the biggest groups of Western fighters with Danes, Italians, and French not far behind.

The news that American Douglas McCain was killed while fighting in Syria also indicates that there are Americans currently in Syria fighting against the Assad regime. In February this year, Director of National Intelligence James Clapper told the US Congress that more than 50 Americans are thought to be fighting in Syria. Canada has also seen a rise in homegrown jihadists going overseas to fight. According to a report done by the Public Safety Canada, an estimated 130 Canadians have joined overseas conflicts, many of them gravitating toward Syria and Iraq to wage jihad. The influx of overseas jihadists is unprecedented. The figures exceed the number of foreign jihadists involved in Afghanistan during its decade of war and its subsequent violent aftermath. Unlike in Afghanistan, many are travelling overseas not to just train or provide financial logistical support, but to also participate in the conflict directly.

There are many reasons why so many individuals have traveled to Iraq and Syria to wage jihad. Many have been drawn in by predictions in a version of Islamic ideology that the apocalypse will take place in Greater Syria. Such narrative has been inflamed by stories of atrocities against Sunni Muslims alleged to be committed by the Alawite Assad regime.

Accessibility is also a factor. In contrast to other jihadi theaters such as in Afghanistan, Mali, and Somalia, Iraq and Syria are much more logistically accessible. Europol reports that many foreign jihadists have traveled through Turkey, a common vacation destination, which arouses no or limited suspicion. Most of the foreign jihadists have been assimilated to ISIL, also referred to as ISIS (Islamic State of Iraq and Syria), but not exclusively. Some have joined other salafi-jihadi rebel groups such as the Jabhat al-Nusra and Ahrar al-Sham.

These groups were founded by individuals who at one time were senior members of al-Qaida. They tend to be more inclusive, highly organized, and much better financed than their more moderate counterparts such as the Free Syrian Army (FSA). The foreign fighters are not only getting indoctrinated ideologically, but are also given training on operational tactics. Many are instructed in using improvised explosive devices (IEDs), car bombs, and suicide attacks.

From a threat perspective, foreign jihadi involvement in both Iraq and Syria could impact the global terrorism risk landscape in multiple ways. First, the returning jihadis potentially could revitalize their cause in their homeland and act as a conduit reconnecting local groups to the global jihad. Second and more importantly, there is also a risk that some of these veterans may attempt a terrorist attacks back in their homeland. While the majority of jihadist foreign fighters do not end up attacking their home countries, a small number do and they often prove more capable and proficient than those without any fighting experience.

Given the stronger counter terrorism environment in the West, such attacks will more likely fall under the category of lone wolf terrorism attacks. These are individuals who work alone or in very small groups and do not seek any type of external assistance to execute their operation thus making it difficult for the authorities to gather enough intelligence to thwart any potential attack. Returning jihadists with proficiency in the local language and the ability to understand Western society can execute and plan their terrorism plot without raising much suspicion. While these homegrown lone wolf plots are much harder to detect and stop, their attacks tend to be limited to smaller attack types.

Current counter-terrorism practitioners assert that ISIS and its foreign contingent are interested in attacking western cities but question whether they have the ability to orchestrate a large-scale attack such a car bomb in cities such as in Toronto or London given the strong counter terrorism environment in these cities. Thus, it appears lone wolf attacks such as assassinations, beheadings, and kidnappings are the more likely scenarios. Despite these changes in the global terrorism landscape, RMS continues to recommend clients to use the standard risk outlook for its suite of probabilistic terrorism models.

Managing the Changing Landscape of Terrorism Risk

RMS has released an updated version of its Probabilistic Terrorism Model, which reflects the considerable changes in terrorism risk for Canada, Denmark, Ireland, Italy, and the U.K. as well as the decreased frequency of large-scale-terrorism events for each of the five countries.

To inform the new view of risk, our scientists carried out a comprehensive analysis of global attack and plot data from the past decade. We focused heavily on large-scale attacks – those with the potential to threaten the solvency of an insurer.

The analysis showed that incidents of large-scale attacks have steadily and significantly decreased, which corresponds with a rise in the funding and sophistication of major intelligence agencies in the west.

Our approach to terrorism modeling follows three principles, which have been validated by data on intercepted plots, past successful attacks, and recent intelligence leaks:

  • Effective terrorists seek to achieve optimal results relative to their effort
  • Their actions are highly rational
  • They are highly constrained by pervasive counter-terrorism measures

Of the estimated 200,000 documents taken or leaked by Edward Snowden, one of the most relevant validations of the RMS model is an N.S.A. presentation that explains the routing of international telecommunications traffic. A very significant proportion of international telecommunications traffic is routed through the U.S. and Europe which, coupled with advances in big data analytics and plummeting data storage costs, has made intelligence collection easier and more robust than it has ever been.

 an N.S.A. PRISM presentation explains the routing of international telecommunications traffic

According to available data on the frequency of plots and attacks, the risk of a large-scale attack has been in decline since 2007, but the risk of smaller-scale attacks perpetrated by lone-wolf operatives and homegrown militants remains high.

However, we have learned over the past decade that terrorism risk levels are fluid and can change quickly. With the rise of the Islamic State in Iraq and reports of its successful recruitment of foreigners, as well as ongoing instability in Afghanistan and Pakistan, the risk outlook can change at any moment.

The RMS Probabilistic Terrorism Model incorporates multiple risk outlooks to provide users with the agility to quickly respond to any changes in terrorism risk. RMS is committed to updating its terrorism model as frequently as necessary to provide the most up-to-date, granular, and accurate view of global terrorism risk.

Dueling Agendas on TRIA

On Thursday, July 17, the Senate passed a reauthorization of TRIA, the Terrorism Risk and Insurance Act, extending the bill for seven years after its expiration at the end of 2014. The bill was passed with a 93-4 vote and made minor modifications to the expiring legislation. This is a promising sign for the insurance industry, which has been lobbying vigorously for a renewal since last year. But before the bill becomes law, there is certain to be opposition from influential members of Congress who favor more significant reductions to the federal government’s participation.

The Senate bill reduces TRIA’s coverage in two key ways: by increasing the industry co-pay from 15% to 20% over a five year period, and by pushing the Federal Government’s “mandatory recoupment” responsibility from $27.5 billion to $37.5 billion. By contrast, a competing bill proposed by Congress calls for even more substantial modifications, most notably raising the program trigger from $100 million to $500 million for all acts of terrorism except those arising from CBRN (chemical, biological, radiological, and nuclear) events.

How the two bills are reconciled will have significant implications for the insurance industry, as any reduction in federal participation will amount to additional risk assumed by insurance carriers. However, property insurers today are more willing to take on terrorism risk that they would have previously excluded, as evidenced by the dramatic drop in terrorism insurance prices over the past decade. A recent study by the Wharton Center for Risk Management downplayed the impact of TRIA changes, noting that while the changes could increase the price of coverage, “firms’ demand for terrorism insurance is not very sensitive to gradual price changes under current market conditions.”

Whatever the case, the ultimate outcome of the TRIA will have a measurable impact on the price and availability of terrorism insurance, primary carriers’ risk appetites in urban areas, and the securitization of terrorism risk, which my colleague Gordon Woo recently wrote about. The U.S. has made great strides in the capability of its counterterrorism operations over the past decade, but even with these gains, insurers and reinsurers must continue managing their pricing, underwriting, and capital deployment strategies to address the risk of future catastrophic acts of terror.

TRIA Renewal #3: No Cake Walk

The Terrorism Risk Insurance Act (TRIA), which provides assistance to pay claims in the USA in the event of a terrorist attack, expires at the end of 2014.

The debate over whether the Act should be extended a third time is likely to be acrimonious given partisan divides over financial legislation. If the renewal fails, the banking, construction, and insurance sectors will be impacted in a significant and troubling manner.

RMS: TRIA Program Highlights, August 2013

RMS: TRIA Program Highlights, August 2013

TRIA was first passed in 2002 and has since been extended and amended, twice. Each extension of the Act has led to tightened coverage by raising deductibles, increasing minimum losses, and reducing the pro-rata government share of losses (currently 85% of a $100 billion layer).

Sponsoring members from both parties have proposed the upcoming 2014 extension three times in Congress this year. This is a hopeful sign of bipartisan support. But the potential for strong opposition should not be underestimated.

Opponents of a TRIA renewal will be quick to label the legislation a “subsidy”. They will correctly point out that TRIA’s federal guarantee has been provided—and insurer money collected—for over ten years without incident. And opponents would be remiss to not mention the U.S. insurance industry surplus, which has grown to almost $600 billion as of this writing—compared to only $290 billion at the time of the September 11, 2001 attacks. From this, they will argue that the insurance industry is sufficiently capitalized to absorb the losses from a catastrophic terrorist incident without government assistance.

This argument against a further TRIA extension is likely to fall on the receptive ears of an electorate (and many freshman lawmakers) that has been galvanized by recent federal involvement in the financial and automotive sectors. In order to successfully counter this narrative, the parties’ case must be reframed to include a discussion of the public benefits of terrorism insurance, of which there are many.

To quantify TRIA’s benefit, it is instructive to look to late 2002, when Moody’s downgraded more than $4 billion of mortgage securities due to the shortage of terrorism coverage.

Additionally, when the bill approached its first expiration in 2005, many property insurers inserted sunset clauses into their contracts, enabling them to alter or revoke terrorism cover in the event of a TRIA non-renewal.

The demand for financial protection against terrorism is as undeniable as the insurance industry’s reluctance to provide it.

The impact of a TRIA non-renewal would be felt the most by cities perceived to be appealing terrorist targets. The RMS® Probabilistic Terrorism Model classifies the most terrorist-prone cities as New York, Washington DC, Chicago, San Francisco, and Los Angeles.

Without TRIA, these cities can expect a shortage of terrorism insurance capacity and corresponding rate increases at the very least. At most, construction and lending activity will be compromised; and the economic consequences (lost jobs, stalled projects, missed opportunities) would surely follow.

TRIA must be viewed in the context of the government’s broader role in the insurance industry. In additional to terrorism insurance, the federal government provides billions of dollars annually in subsidized coverage for lines of business including flood, crop, mortgage, pension, and health— sometimes as a direct primary insurer, other times as a reinsurer.

Occasionally, as in the case of TRIA’s recoupment provision, the federal government’s role is similar to that of a bank, whereby losses are indemnified and then recovered, with interest, through future policy surcharges.

  • Is terrorism fundamentally different from other perils in regard to how the federal government should approach it?
  • What is public benefit of terrorism coverage, and can it be quantified?
  • Can the demand for coverage ever be met by private means alone?

These are critical questions, and they must be addressed directly and publicly by stakeholders in order to justify TRIA’s renewal.

See also ‘TRIPRA – Perspectives on the upcoming expiration & proposed renewal‘ from the RMS Terrorism Risk Briefing in May 2013.