Terrorism remains a difficult risk to insure, but, contrary to the views of some, it can be modeled by measuring the likelihood of an attack against vigorous counter-terrorism efforts employed by Western nations, according to a Risk Management Solutions white paper meant to inform stakeholders as they debate a Terrorism Risk Insurance Act extension.
In fact, the white paper argues that terrorism insurance itself is really insuring against the failure of counterterrorism. "The frequency of such failures is low because of concerted suppressive western government counter-terrorism measures, which are stepped up even further after any successful act of terrorism," RMS says.
The key to modeling the risk, RMS says, is to model terrorist activity at a strategic level, rather than a tactical one. "Dealing with terrorist operations at a tactical level is a task for government officials, not risk-modeling agencies," RMS notes.
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