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Terrorism Risk Management

Whether the reasons are economic, psychological, or social -- or some combination thereof -- terrorism has been an entrenched part of human activity since ancient times.

By Barrett A. Evans,CPCU,AIC | Updated on October 06, 2010
Whether the reasons are economic, psychological, or social—or some combination thereof—terrorism has been an entrenched part of human activity since ancient times. Homicidal zealotry did not begin with the first-century Jewish Zealots, who violently sought to overthrow the Roman rule they thought was such an affront to God. Deadly assassinations did not originate with the Assassins, a Muslim faction in the Middle Ages who were known for the fearless dagger attacks they perpetrated on their enemies. Murderous terrorism did not begin in the French Revolution’s Reign of Terror, when radicals resorted to a liberal use of the guillotine in supposed service of “liberty, equality, and fraternity.”

Although well-rooted in the past, modern terrorism is clearly distinctive because of its international presence and catastrophic potential. Of course, it is this destructive character that has had such a marked influence on recent trends in risk management. The regular occurrence of major international events since September 11, 2001—including the New Delhi Parliament attacks (2001); the Madrid train bombings (2004); the London subway bombings (2005); and the attacks in Mumbai (2008)—demonstrate why it is safe to assume that this new breed of terrorism will be a central part of the risk management process for some years to come.

Challenges to Assessing Exposure Levels

Thankfully, there have been no major terrorist events on American soil since the tragic events of September 11th nine years ago. However, it is difficult to determine how indicative this experience will be of future events. As we are reminded every time we go to an airport, Homeland Security still regards the risks on domestic and international flights to be high. Conservative watch groups like the Heritage Foundation claim that at least 30 terrorist plots have been foiled since September 11th—and that only the highest degree of vigilance will continue to keep terrorism at bay. The difficult job of terrorism risk management can sometimes appear to be mired in subjectivity, often without benefit of the solid actuarial data or predictable loss histories that are so much a part of the assessment of other areas of risk.

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