“Unfortunately, this is not something that you can address and forget about if you want to take it seriously,” Mr. Preistly said.

In Chicago, Aons Bill Harrison, managing director of Crisis Management Practice and part of Aon-Giuliani Protocol partnership, said that pre-incident planning gives clients a place to start in responding effectively to a catastrophic incident. But it is equally important, he explained, that the plan be tested and updated regularly through training and crisis simulation.

“If the plan is not constantly updated with simulations every handful of months, it becomes useless,” he said.

Crisis and contingency planning is a fact of life, agents and other experts say, because insurance coverage is not easy to come by.

There is insurance available for nuclear risk, but it is very expensive and priced to a point where it is not affordable for clients, Mr. Harrison said. The alternative, he said, is to have a comprehensive plan in place to react and respond.

“The problem is that there is not much [agents and brokers] can do about it; its not covered,” said Bill Wilson, director of Virtual University, the educational affiliate of the Alexandria, Va.-based Independent Insurance Agents and Brokers of America, referring to the trio of potential terror events from nuclear, biological or chemical weapons, otherwise referred to as NBC events.

It is probably the most difficult position for an agent or broker to be in–providing services for uninsurable risks.

While the Terrorism Risk Insurance Act gives some financial support for certified foreign acts of terrorism, Mr. Wilson explained that guidance by the Treasury department has virtually eliminated coverage for NBC events.

The Treasury, which is responsible for certification of acts of terrorism, says if a policy excludes nuclear or radiation contamination, then that applies to terrorism as well, Mr. Wilson said. The same goes for pollution exclusions, which would cover biological or chemical terrorism.

He said not all policies have these exclusions, but most do, which means few, if any, have coverage.

The problem for insurance companies is finding underwriting criterion, according to Henry O. Schramm, chief underwriting officer for PMA Group, an insurer based in Blue Bell, Pa.

“TRIA has nothing in it regarding workers compensation, other than it is expected a carrier will provide it. I think thats fine if you are talking about an event that involves a truck bomb or something like that.”

“As much as you can have a devastating loss from that kind of event, I think that kind of thing is quantifiable,” he said, suggesting that it is possible to underwrite against the risk of a truck bombing and that is, he believes, what the government expects the insurance industry to do.

“But when it comes to events like nuclear, biological, chemical or radiological, I think it is a very, very different story. That is where the insurability of such events come into question,” he said, noting that the questions about insurability are legitimate questions.

Experts who are attempting to model these disasters have an enormous amount of data they need to factor into such an event–such as place, weather, number of people, device used–and it is a struggle for them, he said. And each piece of data can have a significant outcome on the model.

“This is all new ground for the industry and those who do catastrophe modeling,” he noted, explaining that these experts are trying to use their natural catastrophe models for this new risk.

“There is no intent on the part of nature to subvert things and get around what you have built,” he continued. “We can build stronger wind protection” into the construction of buildings to mitigate the damage from natural catastrophes. But when “someone is intentionally plotting to subvert whatever you are doing on a conscious basis, the difficulty is predictability and trying to stay a step ahead.”

However, this does not mean that the industry is not rising to the occasion and trying to do what it is capable of doing from a risk control standpoint.

PMA Groups Web site, for example, has information for agents giving guidance on terrorism risk. It advises agents and brokers on what they should be looking for and doing, Mr. Schramm aid. This includes reviewing the concentration of employees, planning escape routes and other conscious risk management practices.

Richard G. Berthelsen, director of curriculum for the American Institute for CPCU and Insurance Institute of America in Malvern, Pa., said the institute is in the very early stages of putting together a curriculum to deal with questions of NBC risk and how the industry needs to address the issue.

In the meantime, Mr. Preistly said that agents and risk managers addressing the issue right now first need to conduct a risk assessment of the types of threats possible, whether that is a bomb or some form of NBC.

The next step is to look at the organization and see where its vulnerabilities are. The aim is to determine how to prevent the incident from happening, and if it does, have a response for people in place.

His example was the anthrax scare, where decisions needed to be made quickly on scant information. Rooms and people needed to be isolated. Others, who were not infected, needed to know where to go and what to do.

Emergency services were called inand will be for future events. But, realistically, the first responders are the people who are in the middle of the contamination while they wait for help to arrive, he explained.

“In the first instance, it is the individual company that must have a robust response plan in place,” he said, adding that the plan must be well rehearsed and everyone involved well trained to deal with the situation.

The primary aim of the risk management plan, Mr. Priestly pointed out, is to save lives of employees and visitors. Should something happen, and a company not have a plan in place, the corporation would be open to charges of negligence. Without the plan, no defense against the charges of negligence would stand up in court, he said.

“A corporation must take sensible, reasonable steps to mitigate the threat,” he said, adding that the mitigation plan should attempt to deal with the event in a safe and timely manner, he noted.

The United States, he observed, is experiencing something that has been a reality, on some level, in the United Kingdom for more than 30 years in its battle with the Irish Republican Army. In that respect, he said, the United Kingdom is ahead of the United States in having procedures in place.

However, he noted, the IRA would issue warnings about their bombings “never wanting mass innocent casualty. They wanted mass damage.”

“Today we have a little group named al-Qaida, whose [members] cause is to kill as many people as they can. That is their aim,” Mr. Priestly said. “We have never had to deal with that.”

Risk managers and agents who are advising their clients on managing the risks associated with potential terror events should review contingency plans and ask themselves if the plans are sensible ones.

“It is not an expensive thing to do and it will save the lives of employees,” Mr. Priestly said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 30, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.