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By STEVE TUCKEY, who has written on insurance issues for a decade for several national media outlets

Look for the annual insured terrorism loss figure for 2011 to be about 12 percent lower than this year's, according to a leading catastrophe risk modeler. Risk Management Solutions Inc. (RMS) made that assessment as part of its annual overall look at the terrorism threat facing the insurance industry. In doing do, RMS joined the consensus that the world faces lower-scale, more conventional threats nine years after the spectacular events in Lower Manhattan on Sept. 11, 2001.

"Nevertheless, the recent flurry of activity is likely to dissipate in the face of increased counterterrorism activity by the U.S. security agencies, but it does show that individuals and cliques inspired by al-Qaida's ideology remain a powerful threat and capable of causing major losses to insurers in America," authors wrote in a 2010 RMS report on terrorism risk.

The RMS assessment and the firm's terrorism model are just one set of several that terrorism insurance underwriters rely upon to price that risk that is said to be by its very nature unpriceable.

Another firm, London-based Control Risks, has warned that the terrorism threat remains but added that it is evolving to a more low-tech enterprise.

"The new threat is more likely to be homegrown, increasingly self-radicalized and low-tech. It is also more difficult to penetrate and less predictable, requiring business to reassess its security provision in 2010," it reported.

RMS agreed that the shift of global terrorism organizations from a centralized al-Qaida to a loose network of clandestine cells has made it significantly harder for intelligence agencies to keep track, reported Gordon Woo, who designed the terrorism model for RMS.

"However, their autonomy limits their growth, and in most cases these groups will require external assistance before they are able to launch an attack," he added.

In its annual terrorism threat review, Chicago-based insurance broker Aon Corp. said that, while the operational ability of al-Qaida may have suffered some degradation in recent years, it has branched out stealthily into pockets of discontent throughout the world.

Retired General Richard Myers, who served as the chairman of the U.S. Joint Chiefs of Staff from 2001 through 2005, noted that the notorious group headed by Osama bin Laden has lost much of its senior leadership recently.

"But their intent remains the same, and there will always be some people they can recruit," he said.

Myers said that the apparent assassination of the No. 3 ranking official of al-Qaida by a CIA drone in Pakistan was a significant blow to the group's terror capabilities "if you are looking at whether on a global scale we are safer from terrorism this year than last."

"But the difference is marginal, and reflects the pressure we have exerted on our foes over the long term to contain their growth," he said.

Military progress in Afghanistan, Pakistan and Iraq by the United States and its allies has forced al-Qaida to rely on less capable local operatives as it struggles to maintain coherent organization under constant pressure, he added.

After touring the globe, Myers said that the weak central government in Pakistan and the questionable enthusiasm of some its military commanders to combat domestic terrorism makes the country a terror threat.

"But perhaps the Taliban recently coming in within about 70 miles of Islamabad will serve as a wake-up call for those in the military," Myers said.

September 1, 2010

Copyright 2010© LRP Publications