8/4/2019 Terrorism Risk Modeling
1/16
47%
6%
Managing Terrorism Risk
TM
8/4/2019 Terrorism Risk Modeling
2/16
A c k n o w l e d g e m e n t s
Risk Management Solutions gratefully acknowledges the input of many world class specialists who acted as consultants and reviewersin the development of the RMSTM U.S.Terrorism Risk Model.These include:
Dr. Rohan Gunaratna
Dr. Magnus Ranstorp
Dr. Bruce Hoffman
Dr. K. Jack Riley
Dr. Robert Reville
Dr. Darius Lakdawalla
Dr. Brian Chow
Dr. Greg Jones
Dr. George Zanjani
Dr. Brian A. Jackson
Dr. Kim Cragin
Dr. Gregory Treverton
Dr. Lois Davis
James Quinlivan
Pete Baxter
Michael Dell
Mark Mateski
David Kuhn
Charles Heyman
Paul Mahoney
Laura Dake
Roger Davies
Dr.William Kastenberg
Rich Balzano
Dr. Lawrence Wein
Mark Sauer
Malcolm Cowler
Head of terrorism research, Institute of Defense& Strategic Studies, Singapore
Director, Centre for the Study of Terrorism and
Political Violence, University of St. Andrews
Vice President for External Affairs andDirector, RAND,Washington D.C.
Director, RAND Public Safety and Justice
Director, RAND Institute for Civil Justice
Associate Economist, RAND andFaculty Research Fellow, National Bureau ofEconomic Research
Senior Physical Scientist, RAND
Senior Defense Policy Analyst, RAND
Economist, Federal Reserve Bank of New York
Associate Physical Scientist, RAND
Associate International Policy Analyst, RAND
Senior Policy Analyst, RAND
RAND
Senior Analyst, RAND
Director, Global Consultancy Operations,Janes Information Group
Business Development Director,Janes Information Group
Consultant and Project Manager,Janes Information Group
Janes Information Group
Senior Military Advisor,
Janes Information GroupJanes Information Group
Janes Information Group
Hazard Management Solutions Ltd.,Editor of TRITON terrorist activity database
Professor of Nuclear Engineering, University ofCalifornia at Berkeley, and member of theAdvisory Committee on Nuclear Facility Safety,U.S. Department of Energy
Consultant, Janes Information Group
Professor of Management Science,Stanford University Graduate School of Business
Consulting Engineer
Senior Engineering Analyst,Autodyn
Terrorism threat from Al Qaeda andassociated groups
Terrorism threat from Islamic militant
groups and political violence in theMiddle East
Terrorism risk in the U.S.
Homeland security
Terrorism compensation & liability
Probabilistic modeling and economics ofterrorism risk
Loss modeling and the defense and
control of terrorism weaponryChemical, biological, radiological, andnuclear weapons in terrorism
Economics of terrorism insurance
Emergency response to terrorismincidents
Historical data on terrorism attacks
Terrorism, intelligence, and lawenforcement
Defense and security at targets
Systems analysis research
Attack technology, logistical burden, andred teaming analysis
Terrorism, intelligence, and newsanalysis
Red teaming, site security and logisticalburden
Weapons systems and unconventionalattack operations
Site security
Security survey of New York skyscrapers
Security survey of New York skyscrapers
Attack technology and terrorist activity
Nuclear power plant safety againstterrorist attack
Nuclear power plant operations andsecurity
Bio-terrorism attacks and emergencyresponse
Industrial facility targeting
Use of computational fluid dynamics forblast modeling
8/4/2019 Terrorism Risk Modeling
3/16
The RMSTM U.S. Terrorism Risk Model
1
The threat of terrorist attack will continue to pose a major risk to the insurance industry into the near future.Thispublication describes how the terrorism landscape is changing, and how such changes are reflected in version 2 of theRMS U.S.Terrorism Risk Model. It surveys the opinions of the team of RMS modeling specialists and external experts,providing background to the key methodologies and assumptions that underlie the RMS model.
The RMS U.S.Terrorism Risk Model provides a comprehensive look at terrorism risk in the U.S., quantifying risk fromboth foreign and domestic terrorist organizations. It supports multi-line risk analysis for both certified and non-certifiedevents impacting property, business interruption, workers compensation, life, personal accident, and accidental death anddismemberment insurance.
The model employs state-of-the-art methods for quantifying the impact of a range of potential terrorist attacks, fromconventional weapons to chemical, biological, radiological, and nuclear (CBRN) weapons.These attack modes aremodeled at potential terrorist targets across the U.S. Attack frequency includes consideration of the potential for multiplesynchronous attacks -- a signature of Al Qaeda.
Probabilistic loss analysisprovides key statistics suchas return period losses,average annual loss, andstandard deviation.
Manage Portfolio Risk
Generate aggregate exceedanceprobability (AEP) loss distributions byline of business and in total Identify most critical terrorist attackscenarios for your portfolio Analyze key drivers of loss byaccount, location, target type, and city Quantify the risk of fire lossesfollowing terrorist attacks for policies
without terrorism coverage
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Expanded Capabilities
Expected
Reduced Capabilities
Loss
Probabilityof
Exceedance
Examine What If? Scenarios
Consider alternative Risk Outlooksto understand sensitivity of results tovarying hazard assumptions Evaluate alternative treatyreinsurance or securitization structuresfor risk transfer Analyze TRIA impact under various
take-up rates Examine impact of exclusions (e.g.CBRN) on re/insurance offerings
Implement Underwriting Process
Develop loss costs by line of business Evaluate and price alternativelayers for excess policies orreinsurance treaties Capture key parameters for
risk scoring Design and implement underwritingguidelines to diversify portfolio risk
High-resolution terrorism
risk maps provide
underwriting guidance in
major cities.
Version 2 of the RMS model
includes alternative Risk
Outlooks, representing
different underlying
assumptions about the
development of the terrorist
threat and attack frequency.
8/4/2019 Terrorism Risk Modeling
4/16
While Al Qaeda has suffered the lossof operational leaders and destructionof its traditional bases in Afghanistan,its intention to attack the U.S. and itsallies has not diminished.To survive
the global hunt,Al Qaeda has rapidlyevolved, adapting its operational andsupport activities, including its fundraising, communication, and even itstargeting practices.
Al Qaeda is trying to compensatefor its losses by turning to groups andmembers it has trained to join thefight. It provides strategic and tacticaldirection to three dozen associatedgroups in Asia, the Middle East, theCaucuses, and the Horn of Africa thatshare the Al Qaeda ideology of auniversal jihad.Throughout the1990s, Al Qaeda and Taliban trainingcamps in Afghanistan trained 70,000to 120,000 Muslim youth in guerrillaand terrorist tactics to fight in thePhilippines, Indonesia, Kashmir,Bosnia, Kosovo, Chechnya, ChinaAlgeria, Egypt, Jordan,Yemen, and
other regions. As the internationalcommunity turned a blind eye,Afghanistan became a terroristDisneyland.
Inspiring Other Groups
In many ways,Al Qaedas greatestsuccess has been to penetrate localIslamist groups waging territorialstruggles by co-opting their leaders
and using those organizations tofight both at a domestic and aninternational level.
Despite being the most huntedterrorist group in history, Al Qaedaremains a formidable threat tointernational security. Since 9/11,over 100 attacks have been abortedor disrupted. Nonetheless, as recentbombings around the world havedemonstrated, the threat has moved
beyond Al Qaeda. Its regionalassociates are as lethal as their parentgroup.They have learned and willincreasingly use Al Qaeda martyrdom
tactics such as hijacking and crashingaircraft, contact poisons, anti-aircraftweapons, and other techniques toinflict mass fatalities on their enemies.
Despite the arrest of several
thousand Al Qaeda members and keysupporters in more than a hundredcountries, the network has been ableto replenish its lost rank and file andcontinue the fight.Although AlQaeda is less able to mountcoordinated multiple suicide attackson the scale of 9/11 inside the U.S.,it is still capable of carrying outmedium scale attacks.
Restricted Capability
There are three reasons why therehas not been another major Al Qaedaattack inside the U.S. Increased human vigilance Unprecedented law enforcement,security, and intelligence cooperation The worldwide hunt for Al Qaeda,denying the group time, space, andresources to plan and mount
spectacular attacksAs long as Western governments
can keep the public alert; shareinformation with Middle Eastern,Asian, and other governments; andmaintain an active global coalitionagainst terrorism, terrorist groupsand their support bases will weaken.
The fight against terrorism is longand hard. Historically, terrorist
groups have an average life span of13.5 years. It is essential to buildcounter-terrorist structures and trainpersonnel to meet the current andfuture threat.Al Qaeda is a globalorganization and no single countrycan fight it.Al Qaeda threatensmilitary, diplomatic, and civiliantargets and is capable of operating inthe air, on land, and at sea.
A wide range of security measures
are necessary to protect againstfurther attacks. Governments need toenlist the support of educational andreligious institutions and community
leaders to build an ethic to combatthe use, misuse, and abuse of religionin Al Qaedas recruitment and
support building.To manage thethreat posed by Al Qaeda and itsassociate groups, a multi-faceted andmulti-national effort is paramount.
The New Al Qaeda
2
Dr.Rohan Gunaratnagiving evidence to
the National Commission on Terrorist Attacks
Upon the United States, (NBC News, July
2003).Dr.Gunaratna is the head of terrorism
research at the Institute of Defense and
Strategic Studies in Singapore. He is also
author of Inside Al Qaeda:Global Network ofTerror and is a senior research fellow at the
Centre for the Study of Terrorism and Political
Violence,University of St.Andrews, Scotland.
Terrorist attacks, such as the bombing of theMarriott Hotel in Jakarta, Indonesia inAugust 2003,demonstrate that the intent toattack U.S. interests is still strong.
AP Wide World Photos
8/4/2019 Terrorism Risk Modeling
5/16
We are in something of a transitionalstate, with our counter-terrorismmeasures becoming stronger while AlQaeda constantly struggles to adaptitself to a new, less congenial
operational environment. During thisperiod of adaptation, there could becontinued smaller scale attacks and,as has been their recent operationalpattern in attacks overseas, mostlyagainst accessible, soft targets.
As military and governmenttargets increase their protectionlevels, softer targets such aseconomic and commercial targetsbecome more attractive --a fact that
has major implications for theinsurance industry.
Trend Towards Soft Targets
In addition to spectacular strikes,developments that have affected Israelover the past 18 months providesome important clues with respectto future terrorist trends: not just asmodels for potential future Al Qaeda
operations, but also as possibletemplates for attacks by othermilitant Islamic terrorist groups. Inthis regard, there are at least fourpotentially significant developments: The sustained campaign of suicidebombing that has convulsed Israelsince the start of the Second Intifadain September 2000. Although suicidebombings have been used since 1993,fully 70 percent of all such incidentshave occurred during the past 20months and have been responsible foralmost half of the 700 people killed. The attempt to bomb a largegasworks in a Tel Aviv suburb thatwould have a potentially catastrophicimpact on the city. The use of SAM-7 surface-to-airmissiles in an attempt to shoot downa charter Israeli passenger aircraft as
it took off from the Mombasa,Kenya airport. The growing use of poisons anddiseased suicide bombers, and
increased interest in chemical warfareamong some Palestinian groups.
Given that these techniques haveno unique operational or technicalrequirements, their ease ofimplementation in the U.S. cannotbe discounted. Indeed, one has to askwhether American or any European
society can easily bear any one ofthose types of attacks.
Potential Social Disruption
One can conjure up highly disruptivepossibilities that fit uncomfortablywithin the spectrum of thetechnological capabilities ofterrorists. Convulsing our society in
the way it has been attempted inIsrael is a real possibility.This can beachieved not only by the use ofweapons of mass destruction, thetargeting of infrastructure, and masscasualty events but also moreincidents that have far-reachingpsychological repercussions onsociety, such as suicide bombings,killings, and assassination of leaders.This is a deliberate and calculated
infliction of sharp, almost unbearablepain that is designed to bring societyto its knees.
Insurance Implications
The insurance implications of theseless spectacular types of attackswould be more frequent, smallerlosses that would mount up overtime.The biggest impact on theinsurance industry and other
businesses would be a destabilizing offinancial confidence and a period ofeconomic hard times.
Emerging Trends for Terrorism Risk
3
Dr.Bruce Hoffman is the vice president
for external affairs and director of RAND in
Washington D.C. He is also the author of
Inside Terrorism and editor-in-chief of
Studies in Conflict and Terrorism, theleading scholarly journal in the field of
terrorism research.
The RMS model provides a comprehensive view of terrorism risk, quantifying loss across aspectrum of micro- and macro-terrorism attacks, from both domestic and foreign terrorist groups.
InternationalTerrorist Threats
DomesticTerrorist Threats
Al Qaeda& Associates
Other ForeignTerrorist
Organizations
Micro-Terror Attacks Macro-Terrorism
$
8/4/2019 Terrorism Risk Modeling
6/16
There are 35 named groups on theU.S. State Departments list ofdesignated foreign terroristorganizations.At least five are activeand have a known presence in the U.S.
Al Qaeda Hizballah Al-Gamaa Al-Islamiyya, anEgyptian Islamic group Kahane Chai, a Jewish extremistorganization Mujahedin-e-Khalq, a Marxist-Islamic and anti-Iranian group
Reviewing the capabilities andmotivations of each group, the mostserious threat is posed by Hizballah.
Provoking Hizballah
If U.S. foreign policy in the MiddleEast extends to changing the regimein Syria, military intervention in Iran,or overt special operations in Lebanon,then retaliation may involve terroristattacks by Hizballah within the U.S.Hizballah already has an establishedpresence in the U.S. and has a known
capability for successful attacks.Hizballah is one of the most
renowned Islamist movements inhistory. Its notoriety as a terroristorganization, as well as a politicalparty in Lebanon, arose from itskidnapping of over 80 westerners inthe 1980s, the attack on the U.S.embassy in Beirut in April 1983, andthe bombing of the U.S. Marines
barracks in Beirut in October 1983.The reputation of Hizballah inguerrilla warfare has been sustainedby its 18-year military conflict withIsrael in South Lebanon, whichculminated in Israeli withdrawal inMay 2000; an event which earned theesteem of the Islamic world.
Proportionate Retaliation
Unlike Al Qaeda, which espouses the
virtue of maximum violence,Hizballah advocates the principle ofproportionate violence. As explainedby one Hizballah spokesman, In our
religion it is not something desirableto kill an enemy who is not about tokill you. If Syrians or Iranians arekilled during the process of regime
change, the consequence is likely tobe proportionate retaliation.
Associated terrorist attacks withinthe U.S. may take the form ofassassinations, bombings, and the useof military weapons.The measuredapproach toward political violence isreflected in the attitude towardsuicide missions. Although suicidemissions were originally justified andsanctioned by Hizballah, moreconventional forms of warfare havebeen conducted since the mid-1980s.Compared with spectacular,maximum-destruction terroristattacks by Al Qaeda, attacks byHizballah are expected to be moreconventional militarily, and generallyresult in fewer casualties and lowerlevels of economic loss.
The modus operandi of Hizballah
reflects the cool-headed rationalityof its leader, Sheikh Hassan Nasrallah,who has assembled a significantpolitical power base in Lebanon.
They demonstrate the principle ofproportionality in their militaryengagements on the Israel-Lebanonborder, responding to attacks with
measured retaliation calculated tostop short of triggering largecounter-responses.
While the chances of a Hizballahstrike on the U.S. are small, muchwill depend on how the Middle Eastsituation develops during 2004.
Threats from Other Foreign Terrorist Organizations
4
Dr.Magnus Ranstorp is the director of
the Centre for the Study of Terrorism and
Political Violence at the University of St.
Andrews. He specializes in the study of
political violence and terrorism in the MiddleEast, particularly the growth and influence of
fundamentalist Islamist movements.His latest
book is Hizballah in Lebanon:The Politics of
the Western Hostage Crisis.
Hizballah has been responsible for a number of attacks against U.S. interests including a massive
truck bomb attack in 1996 on the Khobar Towers military housing complex in Dhahran,Saudi
Arabia.This attack was one of the largest terrorist bombs ever detonated.
Courtesy, U.S. Department of Defense
8/4/2019 Terrorism Risk Modeling
7/16
The FBI defines domestic terrorismas the unlawful use, orthreatened use, of force or violenceby a group or individual based andoperating entirely within the United
States or its territories withoutforeign direction in furtheranceof political or social objectives.
Domestic terrorism in the U.S.over the past half-century has beencharacterized by a series of waves,reflecting the waxing and waning ofcampaigns by different politicalgroups. Active U.S. domesticterrorist organizations currently canbe divided into right wing, left wing,
and special interest extremist groups.
Right Wing Extremists
Right wing groups are characterizedby opposition to federal taxation andregulation, race hatred, and anti-internationalism.Their eclecticdiversity provides a political refugefor paramilitary survivalists, taxprotesters, white supremacists, Neo-Nazis, and supporters of theChristian Patriot and Militiamovements.These groups haveshown themselves capable oflaunching destructive bombings,arson attacks, and even unsuccessfulattempts to attack petrochemical
and nuclear facilities.
Left Wing Terrorist
Groups
Left wing groups aretypically characterized by
radical socialist doctrinewith the goal of bringingabout political changethrough revolution. Leftwing terrorist activitypeaked in the early 1970sduring the Vietnam War.Since the demise of theSoviet Union, left wingterrorism is no longerstate-sponsored, and has fallen to a
low level. Anti-capitalist and anti-globalization demonstrations providecurrent opportunities for left winginspired riots and acts of massviolence.
Special Interest Activists
Special interest groups typically seekto resolve, through direct action,specific issues such as animal rights,
abortion law, and environmentalprotection.The Animal and EarthLiberation Fronts are among the mostactive extremist groups in the U.S.,but their ultimate objective is topromote animal rights and ecologicalissues, so their attacks aredeliberately planned to cause onlymoderate loss.The most destructivepractice of these special interestgroups is the use of improvised
incendiary devices to commit arson.
Domestic Terrorism Risk
Modeling
The RMS terrorism model useshistorical data from pre and post9/11 to model the full spectrum ofdomestic groups that currentlythreaten the U.S. Each domesticthreat group is geographically andideologically distinct and has beenanalyzed independently to provide anintegrated view of the total risk from
domestic terrorism. Users can deriveaverage annual loss for a coverage bylocation, policy, or account, andobtain a portfolio EP curve andrelevant risk management statistics.
Domestic Terrorism Threats in the U.S.
5
Dr.David Miller is senior engineer at
RMS, responsible for implementation of the
probabilistic framework of the terrorism
model. Dr. Miller has a Ph.D. in experimental
physics from the University of California atBerkeley.
The capability for right wing extremists tolaunch deadly attacks was demonstrated inthe 1995 bombing of the Murrah building inOklahoma by Timothy McVeigh.
Historical terrorist activity, the number of
militias,and key crime statistics give an
indication of right wing extremist activity
across the U.S.
Risk ClassesAverage Annual Loss
Commercial
Government
Religion
EducationMedical
Industrial
Recreation
Residential
Agriculture
RMS differentiates the risk of domestic terrorism across ninedistinct risk classes.
AP Wide World Photos
8/4/2019 Terrorism Risk Modeling
8/16
Terrorists are noted for adaptivelearning, and risk modelersaccordingly also need this facility,because the terrorist threat isconstantly evolving. A review of
recent terrorism activity provides anempirical basis for model calibrationand updates in version 2 of theRMSTM U.S.Terrorism Risk Model.
Increased Risk at Soft Targets
A distinctive feature of the RMSmodel is its use of game theory.Game theory predicts that, as primetargets are hardened, rational
terrorists will tend to substitutelesser, softer targets.This predictionechoes the testimony of the CIAdirector, George Tenet, in February,2001, as security is increased aroundgovernment and military facilities,terrorists are seeking out softertargets that provide opportunities formass casualties. In terrorism talk,this is called target substitution.
Since September 2002, some
significant examples of targetsubstitution have occurred. A notableinstance was the holing of the Frenchoil tanker, Limburg, off the coast ofYemen.The terrorists admitted thattheir original target had been a U.S.navy frigate, but they were happy tostrike the softer commercial target,because it was scheduled to supplythe U.S. fifth fleet. Explicit admission
of this soft target strategy has sincecome from Khalid Sheikh Mohammed,the Al Qaeda chief of militaryoperations, who was arrested inMarch 2003.
Reduced Chances of Al Qaeda
Strike
Following the path of least resistanceis a law of nature. It also happens tobe a guiding principle of Al Qaeda,and influences its choice ofweaponry.
The terrorist preference forconventional bombs and ready-to-usemilitary weapons has beendemonstrated over the past year in theattacks in Bali, Mombasa, Riyadh,Casablanca, and Jakarta. Each of thesetarget cities has tourist namerecognition, another notable aspect of
the Al Qaeda modus operandi.The absence of any spectacular Al
Qaeda attacks within the U.S. over thepast year is consistent with riskestimates in version 1 of the RMSmodel. Given the increased globalcounter-terrorism pressure and acorrespondingly high interdiction ratefor planned attacks, version 2 of theRMS model indicates a yet smallerchance of a spectacular Al Qaeda attacksucceeding in the U.S. in 2004.
However, with possible U.S.intervention in Syria and Iran, whichmay be covert or clandestine, there isan additional risk of these statessponsoring Hizballah to make aretaliatory attack against the U.S.homeland. In contrast with Al Qaeda,Hizballahs modus operandi involvesthe concept of proportionate response,
so a Hizballah attack would typically beless damaging than one perpetrated byAl Qaeda. In particular, CBRN attacksby Hizballah are very unlikely.
Even for Al Qaeda, the possibilityof a CBRN attack is somewhat moreremote than last year, given theeffectiveness of the global securitycrackdown.The softening of weapondestructiveness and lethality ismirrored in a softening of targetchoices: more targets in lesser ranked
U.S. cities; more infrastructuretargets, such as bridges, rail stations,and gas stations. Success by counter-terrorism forces in disrupting the AlQaeda network is straining itsoperational capability, and somitigating the terrorism risk forinsurers.
Parameterizing the Evolving Threat
6
Dr.Gordon Woo is the chief architect of the
RMS terrorism model and author of TheMathematics of Natural Catastrophes. His
expertise in game theory stems from his tenure
in the Society of Fellows of Harvard
University.
Concrete bollards in front of the White House
protect against truck bomb attacks.Government
buildings and military bases have seensignificant improvements in security measures.
Trucks can usually get access to many office
buildings because security measures are often
less stringent in private buildings,makingthem softer targets.
AP Wide World Photos
8/4/2019 Terrorism Risk Modeling
9/16
To perpetrate a successful one-tontruck bombing attack, a terroristgroup needs many months to plan,tens of thousands of dollars worth ofequipment, and a team of people that
includes well-trained munitionsexperts.
These resources, althoughsubstantial, are within the familiarrange of operations by terroristgroups. More costly and complex isthe logistical burden of carrying outan attack using technologies of CBRNweapons.The resources and skillsneeded are highly specialized andrare.The processes required toproduce biochemical weapons requirespecialized and expensive laboratoryequipment, and the professional skillsof micro-biologists. Amateurs couldproduce limited amounts of nastycultures in their kitchen sinks --andattacks by these can be highlydisruptive --but achieving masscasualties requires a large scale andprofessional operation.The logistical
burdens of large scale CBRN attackstend to be an order of magnitudehigher than many conventional attacks.
Building a CBRN Capability
We know that our adversary has astrong interest in acquiring CBRNweapons. Al Qaeda is known to haveattempted to purchase radioactivematerials and has experimented withdeadly gases. It has made statementsthreatening the deaths of four millionAmericans and has no moral qualmsor ideological constraints on masskilling.
The obstacles to obtaining CBRNcapability are two-fold. Firstly,specialized materials and equipmentare required. Radiological weaponsneed radioactive source material.Biological weapons require initial
cultures. Chemical weapons needspecial ingredients and reagents. Allof these can be obtained, at a price,from somewhere.
Secondly, and most critically, isthe skill and knowledge required toproduce and assemble weapons thatwork. People with the know-how arethe key.These people are not
commonly available within the ranksof Al Qaeda, but they and theirknowledge are being sought.Captured documents show that AlQaeda has recruited competentscientists, including microbiologistsand technically skilled younggraduates from colleges. Mountingevidence shows that a CBRN skillbase is being developed.
Preventing CBRN Production
Al Qaeda is clearly establishing anR&D team, but there is no evidencethat they have yet achieved anyspecific chemical or biologicalproduction. Our experts estimate itcould take between nine months tothree years for a technically proficientR&D team to become an effectiveproduction unit.
During 2004 there is a small butsignificant chance that CBRNcapability will be achieved. It is aprobability that will grow over time,
unless production capability can bedisrupted and prevented. Efforts todetect, trace, and interdictpreparations are paramount.
Ultimately, however, U.S.
intelligence analysts believe we will belucky to interdict these preparations.They have prepared the public andagencies for an attack. In June 2003,the U.S. government stated that thereis a high probability of CBRN attackwithin 2 years. Although anunpleasant prospect, the insurancecommunity and other risk managerswould be prudent to incorporate thisscenario into their medium term
planning.
Can Terrorists Achieve CBRN Capability in 2004?
7
Pete Baxter is the director of Global
Consultancy Operations at Janes InformationGroup.Janes Information Group publishes
over 200 titles annually, covering areas of
military and security intelligence.
Bomb - 1 Ton
Advanced Guerilla Skills
Personnel
Cost
Time
Skills
$
TotalLogistical Burden:
$$$
Anthrax - Medium, Outdoor
Specialized Skills
Personnel
Cost
Time
Skills
$
Total
Logistical Burden:
Time
$
Time
$
0 5 10 15 20 25 30 people
0 1 year 2 years 3 years
0 $500,000$1m
2350
0
00
00
0 5 10 15 20 25 30 people
0 1 year 2 years 3 years
0 $500,000 $1m
2,390
0 5 10 15 20 250 5 10 15 20 25
0
0
The logistical burden of mounting a successful biological attack can be many times larger than anattack with a conventional bomb. The logistical burden of each attack mode in the RMS model hasbeen analyzed using red teaming techniques.
8/4/2019 Terrorism Risk Modeling
10/16
The security landscape has changedsubstantially in the U.S. over the pastyear, including: The formation of the Departmentof Homeland Security
Significant advances in aviationsecurity Major improvements at ports andfor commercial shipping inspection The rapid establishment of aTerrorism Threat Integration Center Stepped up levels of civil defenseand public preparedness, including thealert system and a readiness publicservice campaign
These and other elements havehelped prevent attacks inside U.S.borders.This security environment isimportant because it increases theterrorists logistical burden byimpairing reconnaissance, fundraising,travel, and weapons acquisition. Itconstrains terrorists to reduce theiractivity, or to mount smalleroperations against softer targets.
Security at Potential Targets
Public and private entities haveinvested heavily in security. Commonprocedures include stand-off barriersto prevent or mitigate vehicle bombattacks, increased security patrols,and access controls for visitors.Specialized security (such as profiling,electronic sniffers, and biometricidentification) is being used at certain
key government buildings, criticalinfrastructure, and high visibilityevents. Sensors and other CBRNdetection technologies are beingtested but may take years to deploy.
Since terrorists research theirtargets to find vulnerabilities, theuneven implementation of securitymeasures, and the measures
differential effectiveness againstdifferent attack modes may changetargets relative likelihood of beingattacked or the relative likelihood ofthe weapon used in the attack.
How Will Security Change in the
Next Year or So?
Much of the new security environmentis here to stay, at least for the
foreseeable future. But there isongoing and legitimate debate aboutthe appropriate level of spending forour protection. Given the fiscalenvironments in the public and privatesectors, the relative concentration oftargets, and the lack of any majorincidents on U.S. soil, further largeinvestments are unlikely.Within thescope of existing resources, key areasfor policymakers to focus on include:
Improving the integration of lawenforcement into intelligencefunctions. Intelligence is key to detectand pre-empt attacks, and lawenforcement is a valuable ally indomestic intelligence efforts. Improving personnel and cargosecurity at airports. Intelligenceindicates that Al Qaeda remainsinterested in attacks using airliners.Although substantial progress has beenmade on securing the passenger side ofairports, considerably less attention hasbeen paid to securing the cargo that isshipped via commercial aviation.
Allocating resources based oneffectiveness against risk. Immediatelyafter 9/11 there was a naturalemphasis on increasing security inevery manner possible. However, asresources become strained, it isnecessary to assess which investmentscan provide the most protection.
The relatively long period since
the September 11 attacks is not anindication that the risk hasdisappeared, as the patient terroristwaits for its targets to soften andbecome complacent. Policymakerswill be challenged to maintain publicawareness and security levels as theamount of time from the last successfulattack in the United States increases.
The Cost of Security
8
Dr. K. Jack Rileyis director of the RANDPublic Safety and Justice and co-director of theRAND Center for Terrorism Risk ManagementPolicy. For over a decade Dr. Riley has been aleader on terrorism policy research, including
national and state vulnerability assessments;individual preparedness for terrorist attacks;airport, port, and border security procedures;domestic intelligence reform issues; andcounter-terrorism resource allocation.
Improvements to security systems in manyareas have increased,making it harder tocarry out terrorist attacks.
A simulated dirty bomb attack in Seattle (May2003) tested emergency response systems andtop officials reactions.Events like these haveimproved public awareness and preparedness.
Average change in security from 2002 to2003 for different target types (consensus
opinion of the RMS panel of experts).
Major Government Buildings
Passenger Airline Anti-hijacking
Military Bases (U.S.)
Nuclear Power Plants
Skyscrapers
AirportsStadiums
Industrial Facilities
Oil and Gas Industrial Facilities
Airport Take-off Zones (SAM)
Central Business District
Hotels & Casinos
Subway and Train Stations
Tourist Attractions
Shopping Centers & Malls
Change in Security
Major increase in security
Significant increase in security
No effective increase in security
AP Wide World Photos
AP Wide World Photos
8/4/2019 Terrorism Risk Modeling
11/16
Understanding Targeting
Fundamental to the assessment andmanagement of terrorism risk is theprocess that terrorists go through toselect their targets.Al Qaeda and itsassociate groups have developed a
highly systematic approach toselecting their targets.As more attackcase studies emerge we see a processof research and evaluation for targetsthat fit the terrorists strategic andtactical objectives.
The planning process for 9/11has been pieced together fromtestimony, witnesses, and captureddocumentation. Following thepreparation of an initial list of target
candidates, a series of meetings andhigh-level approvals prioritized theminto a short-list. Candidate targetsthat were considered --nuclear powerstations, gas stations, bridges -- werenot as important as those finallyselected to meet the criteria ofimpact, chances of success, and timeand resource availability.
Planned Attacks
Other attacks on U.S. and alliedinterests overseas -- bombings, missileattacks, attacks on ships --were alsocarefully planned. Criminalindictments against the perpetratorsdocument the detail of thepreparation for attacks, includingalternative targets considered and thefactors that can cause last minuteswitching of targets.Video footage ofreconnaissance shows what featuresinterest them. Even for lesser scaleattacks, such as individual suicidebombings, the mind-sets of thebomber and the direction providedby the support team has emergedfrom interviewing failed bombersand forensic analysis of attacks thatsucceeded.
Documenting the targeting process
has provided an understanding of theutility of a target to an attacker.Theprioritization of targets comes fromthe amount of economic damage, life
loss, and disruption that would becaused, along with how well thattarget symbolically represents thecause of the terrorists grievance.
City Prioritization
The city where a target is located isan important consideration for aforeign terrorist that is motivated byanti-national sentiment.The philosophyof striking at the economic engines ofU.S. prosperity and symbols of U.S.nationhood and leadership raisesattack likelihood in major cities.Thelarger and more famous the city, andthe more target-rich that city is, thehigher priority it is to the terrorist.Spectacular attacks are likely to beprioritized in major cities, to maximizethe terrorists political agenda.
Choosing Targets
The RMS target database uses thesecriteria to select and prioritizetargets from the terrorists point ofview. RMS researched severalhundred thousand candidate targets
across the U.S., prioritizing eachtarget according to the city it islocated in, the type of asset itrepresents, the potential for
economic and life loss, its symbolicvalue, and its level of security.
Based on this method, some3,400 targets across the U.S. havebeen selected for modeling specific
attacks.These fall into 25 differentcategories ranging from governmentbuildings and public infrastructurethrough to commercial and privateproperty. Detailed data have beencompiled about them to establish theirutility to the terrorist, the likely levelof security, and other factors thataffect target hardness.
The risk to the insurance industryand to the country as a whole
depends on how these targets areviewed by the terrorist. Differenttargeting strategies, developments inthe capabilities of terrorist groups,and changes in the relativities oftarget hardness all affect the risk.
The RMS model recognizes thatthese factors change over time. Itallows users to carry out sensitivitystudies through the use of Risk
Outlooks.These include an expectedoutlook based on our current analysisof the terrorism threat, as well asalternative outlooks reflecting plausiblechanges to the terrorism environmentthat would increase or decrease risk.In a fast developing field, this enablesrisk managers to make use of thelatest intelligence in their terrorismrisk management decisions.
9
Dr.Andrew Coburn is the chief knowledge
architect at RMS, and is widely recognized as
a leader in the science of catastrophe risk. He
was project manager for the RMS U.S.terrorism model development and co-authored
the RMS World Trade Center Disaster special
report.
The identification of targets that wouldprovide the highest utility to the terroristsimulates the decision-making that terroristgroups go through in their targeting.
8/4/2019 Terrorism Risk Modeling
12/16
What kind of loss would terroristattacks cause? To accurately modelthe impact of the full range ofpotential terrorist attacks, a detailedanalysis is required of processes as
diverse as explosions, aircraftimpacts, fires, decontamination,diseases spread through populationsby biological and chemical agents,missile technology, and otherphenomena.
Since the release of version 1 ofthe RMSTM U.S.Terrorism RiskModel, an extensive amount ofresearch and development has goneinto refining loss modeling for allmethods of attack.This work hasincluded advanced physical modelingsuch as the use of computational fluiddynamics (CFD) models to simulatethe effects of explosions in urbanenvironments. High-resolutionbuilding data has been used in thiseffort. Modeling has been broughtdown to a resolution of 50 meters forattack modes where there is a large
variation of loss over a short distance.Additionally, extensive simulations
have been performed for all attackmodes in order to quantify the
uncertainties in losses as well as thecorrelation of losses betweenlocations in a given attack.
Modeling Explosions in Cities
There is an abundance of informationavailable related to the physicalprocesses associated with explosions.However, almost all testing andresearch has been concerned with the
impacts of blast waves on individualbuildings in the open, rather than inthe shielded and complexsurroundings of a city.
Because most ofthe target-richenvironments arein dense city areas,RMS has developedmodeling techniquesappropriate for the
effects of explosionsin a downtownurban environment.CFD simulationmodels help inunderstanding howa blast pressurewave progressesthrough streetpatterns, andbetween andaround buildings.
The shielding effects of one buildingin front of another, and the focusingeffects of blast reflection waves cancause damage and injuries inunexpected places. Districts ofcities have different densities andbuilding heights that affect thedamage caused by explosions. RMScategorizes the city characteristicsthat affect bomb blast behavior foreach target in the model.
Detailed City Data
A key component of thisdevelopment effort has been thecompiling of accurate representationsof building layouts in urban areas.Unique building-specific datadeveloped in conjunction with theSanborn Map Company has addressedthis need.With this data, we have
built computer model replicas ofdowntown urban areas that are thenanalyzed using CFD models for arange of bomb sizes.Thesesimulations provide data on thedifferences in blast wave propagationwhen comparing dense versussparsely built up areas, and in bothcases provide detailed output relatedto the horizontal and verticalvariations in pressure needed todevelop vulnerability functions.
Quantifying Insurance Losses from Terrorist Attack
10
Damage footprint from a truck bomb in downtown Chicago, using
detailed building data from Sanborn maps.
In low density urban environments a bomb
blast sends out symmetrical pressure waves
that damage buildings further away from the
blast.
In high density city centers a bomb blast has
complex reflections and sheltering effects.
Streets focus the blast and cause higher
pressures and damage close in.
High
Low
BlastPressure
8/4/2019 Terrorism Risk Modeling
13/16
Dispersion Modeling
The effects of chemical andbiological attacks depend on howthe agents are dispersed in the
atmosphere.Analytical modelscompute the dispersion of wind-borne contaminants spread across acity. Advanced dispersion modelsincorporate transient puff (singlerelease) and plume (steady-statedissipation) releases across complexweather and terrain conditions topredict the toxic concentration anddosage suffered by the population.
Contagious Disease Modeling
To reflect a growing concern for thepotential of bioterrorism attacks,RMS has introduced a contagiousdisease model that simulates theeffect of smallpox attacks on the U.S.Disease is spread by social interactionand by population movementbetween cities. Different scenariosfor the effectiveness of emergency
response in treating, quarantining,and vaccinating the population tocontain the outbreak are based oncurrent policies and simulationexercises carried out by governmentauthorities.
Business Interruption Modeling
The World Trade Center disasterresulted in unprecedented businessinterruption (BI) losses, due to thenature of the attack and its location ina major financial center.To understandthe primary factors leading to BIlosses in this event, RMS surveyedinsurance companies regarding thenature of their claims. Extra expensefactors such as relocation costs playeda large role in exacerbating BI losses.
The RMS model quantifies direct BIincluding extra expense, as well asBI due to civil authority areas.
Casualty Modeling
Injuries to building occupants and
population in the streets are criticalelements of the effects of terroristattacks. RMS models human casualtiesfor workers compensation, life, health,and other lines. Six injury states areused to model casualties resultingfrom various attack modes.Theseinjury states provide a more refinedrepresentation of casualty losses.
11
Guy Morrowis head of science and
engineering at RMS. He manages thedevelopment of all hazard and vulnerability
modeling for the U.S.Terrorism Risk Model.
He is a registered civil and structural
engineer in the state of California.
The weather conditions play an important part in the dispersal of an anthrax attack.The RMS
model examines attack scenarios using multiple wind directions and windspeeds to determine spore
deposition densities across a city.
Urban population pools subject to smallpox spread in the RMS model.
8/4/2019 Terrorism Risk Modeling
14/16
Since the watershed industrycatastrophes of Hurricane Andrew in1992 and the Northridge Earthquakein 1994, virtually all members of theinsurance industry exposed to natural
catastrophes have become proficientin the use of probabilistic catastrophemodels to manage risk.
While terrorism models canprovide the same type of output, it isclear that the nature of this perildemands a somewhat differentapproach to managing the risk. Ratherthan rely solely on probabilistic lossanalyses, prudent risk managersutilize multiple methods of assessingterrorism risk to triangulate on themagnitude and location of risk.Effective terrorism risk managementrequires answers to the followingquestions: Where are my greatest multi-lineexposure concentrations, and are anyof them near high-risk terrorismtargets? Using benchmark deterministic
terrorism scenarios (e.g. 2-ton truckbomb), are there any potentialattacks that could result in lossesgreater than managementsprescribed threshold? What cities, target types, oraccounts are the key drivers of myportfolio loss? When considering full probabilities,what is the portfolio loss distribution?
Multi-line Accumulation
The extremely focused geographic areaimpacted by certain terrorist attackmodes highlights the need to capture
high-resolution exposure informationfor multiple lines of business.
Using a 400-meter radius (therange in which most damage occursin typical conventional weaponsattacks), users can identify areas ofgreatest multi-line exposureconcentration anywhere in aportfolio, or around high-risk targets.
The fact that 400 meters issignificantly smaller than a typical ZIP
Code underscores the need for high-resolution building level geocoding.
Deterministic Scenarios
Having identified the areas of exposureconcentration, the next step is toanalyze loss scenarios at key targets on
a deterministic basis.Accumulationsare managed by maintaining losses atan acceptable level for benchmarkscenarios in high exposure areas.
Key Drivers of Loss
Analysis of a comprehensive event setalong with the relative likelihood ofevent occurrence can be used tounderstand the drivers of portfolio
risk.These results allow the riskmanager to drill down to determinedrivers of loss by city, account, lineof business, and target type.
Hazard: A Moving Target
The terrorism hazard is constantly
changing as the U.S. fights the waron terrorism.The fact that the hazardfluctuates while insurance premiumsare typically fixed for one yearindicates that risk managers shouldevaluate losses using not only thecurrent estimate of hazard, but alsoalternative high and low hazardestimates that could occur over thenext 12 months.
Enterprise-wide Risk
While managing terrorism risk iscrucial to the survival of a company,it is only one piece of the catastropherisk puzzle. RMS technology iscompatible across perils, allowing theuser to combine natural catastropherisk with terrorism risk to view totalcat losses on an enterprise-wide basis.
Application of Terrorism Models to Manage Risk
12
Peter Ulrich is managing director of the
RMS Enterprise Risk Management practice.He
has lectured on the linkages between terrorismand enterprise risk at numerous seminars and
conferences, and was co-author of the RMS
white paper Managing Enterprise Risk in the
Aftermath of the WTC Catastrophe.
Application of an attack footprint to portfolioexposures highlights an insurers potential forloss resulting from a terrorist attack.
Terrorism loss exceedance probability (EP)curves for individual lines of business can becombined with natural catastrophe perils toview total catastrophe risk.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Number of Employees Average Annual Loss
AllOther
Policies
AllOther
Policies
Account A
Account B
Account D
Account C
Account E
Accounts A-E
Detailed loss output highlights accounts andlocations that drive overall portfolio risk.
Combined Cat Risk
Terrorism Property
Terrorism Workers Comp
HU Property
EQ Property
EQ Workers Comp
Loss
Pro
ba
bil
ity
of
Excee
dance
0%
1%
2%
3%4%
5%
6%
7%
8%
9%
10%
11%
12%
8/4/2019 Terrorism Risk Modeling
15/16
Probabilistic Terrorism Model History
Original release: September 2002
Most recent upgrade: September 2003
Future upgrades: modeled frequency and target
prioritization are updated as dictated by changes in the
terrorism landscape
Model Scope
Geographic scope: United States
Lines of business: property (building, contents,
business interruption) and workers compensation;
life, health, personal accident, accidental death anddismemberment available on a consulting basis
Comprehensive coverage of both foreign and
domestic terrorist groups
Exposure Data Resolution
Latitude/Longitude, Street Address, or ZIP Code
Probabilistic Event Set
Approximately 78,000 events at 3,400 targets
AEP with secondary uncertainty considers both
event frequency and potential for simultaneous
coordinated swarm attacks
Attack Modes Modeled
Bomb: 600 lb, 1 Ton, 2 Ton, 5 Ton, and 10 Ton Aircraft Impact Attack
Conflagration Attack
Sabotage-Industrial Explosion: 3 magnitudes
Sabotage-IndustrialToxic Release: 3 magnitudes, 4
wind directions
Sabotage-Industrial Explosion & Release: 3 magnitudes
Sabotage-Nuclear Plant: 3 magnitudes, 4 wind
directions
Chemical-Sarin Gas:Weaponized Indoors, Outdoors
(3 magnitudes, 8 wind directions)
Biological-Anthrax:Weaponized Indoors; Outdoors
(3 magnitudes, 8 wind directions)
Biological-Smallpox: Conventional (3 magnitudes, 3
response scenarios); Genetically Engineered (2
magnitudes)
Radiological-Dirty Bomb: 2 magnitudes, 4 wind
directions
Nuclear Bomb: 2 magnitudes
Special Features
Results provided for foreign certified, foreign non-
certified, and domestic losses individually and in total
Integrated functionality for application ofTRIA
coverage
Ability to combine terrorism AEP/OEP with RMS
natural peril output
Ability to exclude attack types (e.g. nuclear exclusion)
Related Products
U.S.Terrorism Target Database: includes target name,
latitude/longitude, address, category, and likely attack
modes
U.S.Terrorism Scenario Model: includes simple and
VRG damage footprints for deterministic scenario
analysis of specific attack modes
Terrorism Loss Costs: available on a consulting basis
for all coverages and lines of business
8/4/2019 Terrorism Risk Modeling
16/16
2003 Risk Management Solutions, Inc.All rights reserved. RMS and the RMS logo are trademarks of Risk Management Solutions, Inc. All other trademarks are property of their respective owners.
R i s k M a n a g e m e n t
S o l u t i o n s , I n c .
7015 Gateway Blvd.Newark, CA 94560USA
Tel 1.510.505.2500Fax 1.510.505.2501Tel 44.20.7256.3800 (Europe)W o r l d w i d e W e b
http://www.rms.com
E - m a i l