As renewal of the Terrorism Risk Insurance Act stalls in Congress, the al-Qaida terrorist network is morphing into a different organization than it was four years ago, according to one expert.
The group responsible for the brazen attacks of Sept. 11 has broken up and its core has been weakened, thanks in part to government counterterrorism initiatives undertaken over the past four years, says terrorism expert Rohan Gunaratna, author of the book "Inside Al Qaeda."
"We have seen that al-Qaida has dispersed," he said, speaking to a group of insurance executives in Monte Carlo in September. "You can call it the fracturing of al-Qaida."
The poorly executed bombings in London last summer are evidence that the organization is not as powerful as it once was, said Gunaratna. In addition, recently intercepted messages among al-Qaida leaders reveal frustration at their inability to cause large-scale disruption.
Speaking at a recent gathering of insurance brokers in October, even former Secretary of State Colin Powell suggested it was important to keep the bigger picture in mind when discussing terrorism. "We've got to be careful not to be terrorized by terrorism," he said.
But the fight is far from over, Gunaratna said. With al-Qaida a quieter, more nimble, diffuse force and less monolithic and centralized than it used to be, the group has begun to infect other terrorist organizations.
One terrorist plan, dubbed the "Gas Limo Plan," shows how terrorist tactics of one U.K-based cell have changed.
When authorities broke open the cell, they discovered the alleged terrorists never used an alias, held no financial accounts, had no friends, always used public transportation, never used cell phones and always met in public spaces, speaking only by covering their mouths with their hand to prevent lip-reading. This was a change in tactics, said Gunaratna. And it took authorities two years to discover the cell.
While al-Qaida has dispersed, some terrorist groups operating today are bigger and stronger than they were four years ago. In addition, new groups have also emerged, some taking advantage of the political instability in Iraq as a place to organize and reorganize, Gunaratna said.
Some terrorist groups have made a "significant investment" in shifting from developing chemical and biological weapons to developing nuclear weapons, he said.
In addition, terrorist cells originally set up to support so-called "attack cells" have now shifted gears into attack mode themselves. The cell in Madrid, for example, originally created to foment Muslim fervor and spread propaganda, turned into an attack cell before killing hundreds of passengers on trains and in train stations in March 2004, said Gunaratna.
One terrorism expert said that heavy-handed tactics used to chase down terrorist organizations, such as the U.S. invasion of Iraq, were deeply misguided. Terrorism can never be defeated by sending in the army, said risk management consultant and security expert Stephen Patrick Cain.
The British Army, for example, learned that lesson in Northern Ireland where it was never able to quash the Irish Republican Army.
THE BACKSTOP BATTLE
All of which underscores the importance of the insurance industry, as well as sovereign governments, having a long-term plan to insure the private sector against damage caused by terrorism, according to proponents of renewing the Terrorism Risk Insurance Act.
The law, passed by Congress in the wake of the Sept. 11 attacks, offers insurers a backup plan. The law requires that the government pay 90 percent of the terrorism-related claims and the insurance industry 10 percent, over a fixed retention. Government losses are capped at $100 billion.
TRIA expires Dec. 31. Insurance carriers writing policies taking effect after that date will not have the benefit of government guarantees, leaving them with terrorism exposure.
While Democrats in the Senate and the House have called for an extension of the law, Republicans are divided over what form the new law should take, or even whether it should be renewed at all.
The White House has backed a plan to renew the law, though not in its current form, and House Republicans are on record as saying that the simple renewal of the existing law is unacceptable.
One consumer group, the Consumer Federation of America, has dismissed the law as yet another government subsidy for the nation's insurance and real-estate interests.
"It's impossible to justify terrorism insurance subsidies when insurance profits are skyrocketing, property/casualty insurance rates are sinking and beleaguered taxpayers still face growing budget deficits," said J. Robert Hunter, director of insurance for CFA, in testimony before Congress last August.
Nor has the marketplace, outside of densely populated areas like New York and Washington, shown much interest in buying federally insured terrorism insurance products.
Commercial insurance buyers in Des Moines, Iowa, and Fargo, N.D., for example, hardly feel threatened by terrorists and don't see the need to buy federally insured property/casualty terrorism products.
For their part, insurance industry leaders say some kind of plan is essential because it would give the public markets confidence in insurers about helping them pay for a terrorism-related disaster.
Referring to the importance of renewing TRIA in one form or another, Joseph Plumeri, CEO of Willis Group, the large London-based broker, said, "The capacity of the insurance industry and the private sector is not unlimited."
"We believe it (TRIA) should be renewed as a confidence-builder for the economy and the marketplace," said Ron Pressman, CEO of GE Insurance Solutions. "We also believe that lawmakers and the insurance industry must work together now to develop a long-term solution to the issue of insuring terror risk."
That long-term solution for catastrophic risk appears likely to take the form of a public-private partnership. Such mechanisms exist in the United Kingdom and France.
"It's clear that in the United States, the government and the insurance sector need to come together to develop a solution," said Plumeri, one of the industry's most vocal proponents for renewing the insurance backstop.
"Maybe it is a model based on the (U.K.) Pool Re with a catastrophe level of support from the U.S. government in a restructured TRIA," he said. Maybe it is a completely different mechanism. But a government and industry partnership seems to be the way to go."
Other top insurance industry executives have expressed doubts about whether TRIA will be renewed. Warren W. Heck, CEO of the Greater New York Mutual Insurance Co., for example, who lobbied before Congress last summer on behalf of the National Association of Mutual Insurance Companies in favor of renewing the law, said last winter that renewal looked "really very uncertain."
Edmund F. Kelly, chairman, president and CEO of Liberty Mutual Group, said earlier this year that he thought TRIA would eventually be extended, but not without concessions.
In the United States, public-private insurance mechanisms already exist, according to the Insurance Information Institute, an insurance industry clearinghouse.
Public-private insurance mechanisms include the Florida Hurricane Catastrophe Fund; the Florida Citizens Property Insurance Corp.; the National Flood Insurance Program; the California Earthquake Authority; the Nuclear Insurance Program, also known as the Price-Anderson Act; and the Fair Access to Insurance Requirements Plans.
CYRIL TUOHY is managing editor of Risk & Insurance®.
December 1, 2005
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