Category Archives: Terrorism Risk

Cyber and the War Exclusion

In 1915, Cuthbert Heath – pioneer of catastrophe insurance at Lloyds of London, decided to offer insurance policies to cover the impacts of war, far from the front line. Zeppelin airships were arriving over London during World War One, dropping bombs and incendiary devices. Later in the War, the bombs were being thrown out of Gotha biplanes.

Heath did some simple calculations: the number of Zeppelins, the frequency of attacks, the number of bombs each airship could carry, the damage area of an explosion, and how much of London was built up compared to open spaces. Having generated a risk cost estimate, he then multiplied it by six to arrive at his proposed rate for the insurance coverage. As the intensity of air attacks went up and down so his insurance prices followed.

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Understanding the Terror Attacks in Sri Lanka

A decade ago, an RMS colleague traveling to Bali for a climate change conference sought my advice on where to stay to minimize the risk of falling victim to terrorism. In 2002, some 204 people had been killed in a bomb attack by Islamist militants in Kuta Beach, a busy tourist area in Bali. My advice then, as it is now, was to stay away from luxury hotels. Not just for tourists, but for insurers also, the risk to luxury hotels is far higher than for lesser accommodation.

The basic principles of terrorism risk modeling explain the terrorist preference for luxury hotels and places of worship, both of which were targeted in a coordinated terrorist attack in Sri Lanka on Easter Sunday (April 21), which with a current death toll of 290, has nearly killed half as many more people than the Bali bombing.

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LockerGoga Cyberattack on Norsk Hydro

On Monday, March 18, 2019, Norsk Hydro, one of the world’s largest aluminum producers, announced the replacement of its CEO, who had left the company through early retirement. This followed admissions that the company was responsible for a massive environmental spillage of bauxite residues at its plants in north-eastern Brazil in February 2018. As a result, a government-imposed shutdown of some of Norsk Hydro’s operations had seen aluminum production at its Alunorte refinery cut to just 50 percent of its capacity.

Late that same evening, the company’s IT team became alerted of a major cyberattack. At a press conference the following morning, it was the CFO rather than CEO who disclosed that IT systems in most Norsk Hydro business areas were impacted, including the digital systems at its smelting plants. Apart from switching to manual operations at its smelting plants, several metal extrusion plants had to be shut down. Acting resiliently to avoid infection from one plant to another, Norsk Hydro quickly isolated its plants.

Alunorte alumina refinery, Barcarena, Pará, Brazil. Image credit: Flickr/Amazônia Real

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Comprehending America’s Far Right Terror Groups

A surge in right wing populism, rooted by the effects of globalization has energized a series of extreme right political movements across the world. Many such groups have resorted to acts of terrorism violence to express their objectives. Some have even committed mass shooting events such as the recent tragic events in Christchurch, New Zealand.

Unfortunately, the United States has not been an exception to this trend. According to the University of Maryland’s Global Terrorism Database, right wing inspired terrorist acts in the U.S. have grown from six percent to 35 percent from 2010 to 2016. The Center for Strategic and International Studies (CSIS) also reported that between 2016 and 2017, right wing inspired violence had also quadrupled in the U.S. – a terrifying trend. This blog will attempt to address this threat of far-right terror groups in the U.S.

The threat from far-right terrorism in U.S. is not a monolithic one. While it is true that far-right terrorism is very vibrant and structurally diverse, the groups do still fall under two categories: White supremacist and anti-government extremists.

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Terrorism in Christchurch

Since 9/11, there have been sporadic attacks on Muslims in Western countries, perpetrated by right-wing terrorists, but none has been more horrific and shocking than the coordinated assault on two mosques in Christchurch, New Zealand, after Friday prayers on March 15, 2019.

Anniversaries have a special significance in the terrorist calendar. This act of wanton religious violence took place several weeks after the 25th anniversary of the most infamous mosque shooting, in Hebron, Israel, on the morning of February 25, 1994. Baruch Goldstein, a doctor raised in U.S., entered the mosque at the Tomb of the Patriarchs, pulled out an assault rifle, fired 111 shots, killing 29 Muslims, injuring 125 others. It looks as if this carnage was surpassed in Christchurch.

Terrorist lone-wolves, like Baruch Goldstein, are hard to track because they leave only a small plot planning footprint. The Christchurch attack appears well coordinated and executed, and would have left a sizeable plot planning footprint, that security officials might potentially have detected.

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Terrorism Risk for California Workers’ Compensation

The terrorism landscape has changed significantly since 9/11. There is a visible shift from large-scale attacks to a growing number of lone wolf attacks. Many believe there has not been a major terrorist event in the United States post 9/11, but one should not overlook the near-misses in the recent past which could have caused massive losses such as the 2016 New York-New Jersey bombings.

The unpredictable and catastrophic nature of terrorism led to the emergence and continued reauthorization of the U.S. Terrorism Risk Insurance Program or TRIPRA, a federal backstop for defined acts of terrorism, which facilitated insurers to continue to provide terrorism coverage after 9/11.

Assessing Workers’ Compensation Risk from Terror Attacks in California

Reflecting this changing landscape, RMS conducted a terrorism risk study for the Workers’ Compensation Insurance Rating Bureau of California (WCIRB). The WCIRB is an unincorporated, private, non-profit association comprised of all companies licensed to transact workers’ compensation insurance in California and has over 400 member companies.

This study has received considerable market recognition, following our previous successful engagement to provide California earthquake risk assessment.

The objective of our study was to estimate California’s workers’ compensation losses to be retained by insurers due to terrorist acts, under TRIPRA for calendar year 2019. Please find a link to the study here.

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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.

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Mapping 500 Trillion Dollars of Insured Exposure

RMS has just completed a two-year exercise documenting all the different types of insurance that are available in the market and a classification system for all the assets that they protect. This is published as a data definitions document v1.0 as a standardized schema for insurance companies to have a consistent method of evaluating their exposure.

This project, in collaboration with research partners Centre for Risk Studies at University of Cambridge, and a steering committee of RMS clients, involved extensive interviews with 130 industry specialists and consultation with 38 insurance, analyst, and modeling organizations.

The project will enable insurance companies to monitor and report their exposure across many different classes of insurance, which globally today covers an estimated US$554 trillion of total insured value. The data standard will improve interchanges of data between market players to refine risk transfer to reinsurers and other risk partners, reporting to regulators, and exchanging information for risk co-share, delegated authority, and bordereau activities.

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Downward Counterfactual of the Seattle Suicide Pilot Crash

When hazard events occur, substantial resources are often committed to find out what happened, and investigate the factors that led up to them. Rarely is there a systematic investigation of downward counterfactuals, addressing the question: how could the loss consequences have been more severe?

On October 31, 1999, an Egyptian pilot, Gameel Al-Batouti, deliberately crashed EgyptAir 990 into the Atlantic, en route from JFK to Cairo. Batouti had waited to be alone in the cockpit of the Boeing 767, and had intentionally manouvered the airplane to its destruction, switching off the engines. His last words, repeated several times, were, ‘I trust in Allah’.

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Terrorism Modeling: The Challenges of Keeping One Step Ahead

A version of this article was published by Insurance Day

Terrorism is asymmetric warfare, and terrorism risk analysis entails knowing not only what has occurred in past terrorist campaigns, but also everything that could have occurred. Carl von Clausewitz, the foremost Prussian military theorist, insisted that perfecting the art of warfare entailed knowing not only what had occurred in previous wars, but also everything that could have occurred. The catalog of successful terrorist attacks is only a small subset of the much longer list of terrorist plots, most of which have been interdicted through the diligent surveillance and pre-emptive action of the counter-terrorism forces.

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