Insuring Against Failure: The Terrorist Threat to Australia

This is a reprint of an article originally published in Insurance News. For the original article, click here.

Australia, along with New Zealand, is part of the formidable Five Eyes Alliance with the intelligence forces of the U.K., U.S. and Canada.

With a massive annual budget of US$100 billion (AUD$138 billion), this is the most effective and intrusive intelligence cooperative in the world, capable of smashing terrorist cells and interdicting complex terrorist plots.

The price of security is not just financial; there is also a cost in loss of privacy. At a recent Five Eyes ministerial meeting on Australia’s Gold Coast, a statement was issued warning that privacy is not absolute, and tech companies must give law enforcement access to encrypted data.

Credible intelligence assessed by Australian security agencies indicates individuals or groups continue to possess the intent and capability to conduct a terrorist attack in Australia. On a five-grade scale, the current threat level is three: probable. The higher grades are “expected” and “certain”. By comparison, the U.K. threat level is one notch higher at grade four.

Everyone has their own social network. For terrorists, interaction with their social network is needed for motivation and gaining the tradecraft for terrorist operations. However, the more communication there is between cell members, the greater the chance that counter-terrorism surveillance will close in. Too many terrorists spoil the plot.

As an example of the pitfalls of terrorist communication, a Pakistani and Middle Eastern terrorism cell with Islamic State links made contact with a British “amateur jihadi hunter” to discuss a possible Ramadan attack in Melbourne. The plot, which was disclosed in June, was ambitious. It involved making a car bomb and driving it at a crowded corner of the Queen Victoria market, a prime city tourist landmark. The jihadi hunter reported his communication to the Australian authorities, which notified Australian law enforcement.

Tributes after the Lindt Café siege, Martin Place, Sydney, taken on December 18, 2014. Image credit: Wikipedia/Sardaka

“Lone wolves” have the best chance of evading the surveillance net and launching an attack. They can plan and execute their attack without communicating with anyone else. One such lone wolf was the self-styled Muslim cleric who took 18 people hostage at the Lindt café in Sydney in December 2014. Man Haron Monis killed the café manager before being himself killed; another hostage died from a ricocheting police bullet.

Since then a number of lone-wolf stabbings and shootings have taken place in Australia. But such acts of micro-terrorism are lost in the overall statistics of violent crime. After a lone wolf, brothers have the smallest social network profile, with the maximum chance of evading surveillance. Sydney brothers Khaled and Mahmoud Khayat allegedly planned to detonate an improvised explosive device on a flight to Abu Dhabi. This major plot was not reported through intelligence, but by an astute Etihad employee at Sydney airport who was curious about overweight luggage.

Apart from the plane attack, another alleged plan was to build a device that could unleash poisonous gas – hydrogen sulphide – in a confined, crowded public space. Police say they found precursor chemicals and some components of the device in Sydney. The brothers are due to stand trial next year.

There are, and always will be, a number of marginalized Muslim Australians who are not well assimilated within Australian society and yet are unsatisfied with modern identity politics, which encourages promotion of their own Muslim identity. This small minority of Muslim Australians are vulnerable to Islamist radicalization. Despite well-funded government counter-radicalization initiatives, several hundred Australians traveled to Syria and Iraq to fight for Islamic State. Furthermore, a thousand with links to terrorists are known to the Australian authorities.

For Australian insurers, terrorism cover is insurance against the failure of counter-terrorism.

This is a reprint of an article originally published in Insurance News. For the original article, click here.

Catastrophist, RMS
Gordon is a catastrophe-risk expert, with 30 years’ experience in catastrophe science, covering both natural and man-made hazards. Gordon is the chief architect of the RMS terrorism risk model, which he started work on a year after joining RMS in December 2000. For his thought leadership in terrorism risk modeling, he was named by Treasury & Risk magazine as one of the 100 most influential people in finance in 2004. He has since lectured on terrorism at the NATO Center of Excellence for the Defense against Terrorism, and testified before the U.S. Congress on terrorism-risk modeling. As an acknowledged, international expert on catastrophes, Gordon is the author of two acclaimed books: “The Mathematics of Natural Catastrophes” (1999) and “Calculating Catastrophe” (2011). Dr. Woo graduated as the best mathematician of his year at Cambridge University and he completed his doctorate at MIT as a Kennedy Scholar and was a member of the Harvard Society of Fellows. He also has an Master of Science in computer science from Cambridge University.

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