In 9/11 aftermath, insurance companies try to outwit terrorists

Ed Leefeldt

On the eve of the 10th anniversary of 9/11, terrorists – both homegrown and foreign – still pose a threat to Americans. The FBI warns of scenarios where small planes could imitate the World Trade Center disaster. Security has been beefed up at airports, train stations, nuclear plants and sporting events.

Insurers are keenly aware of the ever-present, deadly and costly danger of terrorism. That’s why, in the post-9/11 world, more and more professionals at insurance companies are trying to think like terrorists in an effort to outsmart them.

These insurance professionals are members of America’s growing army of terrorism fighters. Insurers are interested not only in saving lives but saving money. The 9/11 attacks killed close to 3,000 people; the insurance costs of 9/11 added up to $40 billion (as measured in 2010 dollars). By comparison, Hurricane Katrina’s costs surpassed $45 billion.

Since the 9/11 attacks on the World Trade Center and the Pentagon, insurance professionals have become soldiers in the war on terrorism.

Insurers in the era after 9/11 are being even more vigilant about safety at more than 300,000 potential terrorist targets in the United States, including office buildings, warehouses, transportation hubs, schools, hospitals and churches.

The insurance industry’s attention to terrorism is certainly warranted. In a report titled “Terrorism Risk: A Reemergent Threat,” the Insurance Information Institute cited several post-9/11 scares: New York’s botched Times Square attack in 2010, the underwear bomber who failed to blow up a plane but compelled airports to conduct full-body screenings, an AWOL soldier’s plan to mimic the Fort Hood attacks in Texas that killed 13 soldiers and lesser-known occurrences like an attempt to sabotage a Christmas tree lighting ceremony in Portland, Ore.

“Big cities such as New York, Washington, San Francisco and Chicago are bigger targets than suburban areas,” says Loretta Worters, a spokeswoman for the nonprofit Insurance Information Institute. “Bridges, subways and key transportation hubs are going to be likely targets.”

Think like a terrorist

One way insurers aim to protect those likely targets is by doing a lot of research on how terrorists think, specifically where and when they might strike. Significant dates stand out. For example, an attack on Sept. 11 proves that terrorists could strike at will, experts say, and rub salt in this nation’s still-raw wounds. Like the FBI, military and homeland security, insurers have their own experts to predict where attacks would take place and at what cost, much the same way that weather forecasters predict the path and destruction of a hurricane.

But analysts say this is only one step. After determining likely targets, an insurers’ next step is to “harden” them against terrorists. This means forcing companies, utilities, stadiums, concert venues, universities and others that buy insurance to take the steps necessary to protect against potential attacks. Insurers that used to go to these places looking for sprinkler systems now go armed with terrorism checklists.

Many of the changes that insurers have forced companies to make can be seen by people who visit those companies or work there. If these precautions are evident, oftentimes you can thank an insurer:

• Physical security. Barriers and barricades block an entrance to a building or garage, and a security guard with a mirror checks under cars. Cameras record entries and exits. Steel-backed bulletproof office doors have no nameplates, making it more difficult for a gunman to target a victim.

• Personnel security. The front desk is manned by a guard who demands to see a photo ID of every visitor. No one gains entry without an escort. Retired police officers, licensed to carry firearms, provide extra security.

• Evacuation plan. The plan is posted in plain sight, medical personnel are stationed inside buildings, and “checkers” are assigned to make sure everyone is safely evacuated.

Small victory

Insurers and the nation scored a major, but little-known, victory in what didn’t happen after Sept. 11. Commercial aviation would have been grounded unless planes were insured. New construction in a city like New York would have been outrageously expensive if contractors couldn’t get insurance.

But that never happened. Terrorism insurance is easy to buy; according to a survey by the world’s second largest insurance broker, Marsh & McLennan, more than 60 percent of the companies surveyed have it.

Ground Zero and other property affected by the 9/11 terrorist attacks sustained billions of dollars in damage.

“Reports of property owners, retail outlets or sporting events having problems securing terrorism coverage no longer make headline news,” says the Insurance Information Institute’s Worters, who notes that even the 2012 Olympic Games in riot-prone London secured terrorism coverage.

This is thanks in part to insurers themselves and in part to a federal government backstop called the Terrorism Risk Insurance Act. Insurers took the first step by agreeing to pay World Trade Center claims even though President Bush declared the event “an act of war,” which voids most insurance contracts.

But in 2002, insurers received help when President Bush and Congress passed the terrorism insurance law, setting up a federal program for insurers if their losses from a terrorist event exceeded $100 billion a year. While this sounds like a lot of money, experts have warned that a biological or “dirty bomb” attack in the midst of New York City could cost insurers as much as $800 billion.

The Insurance Information Institute says terrorism risk insurance, which was practically nonexistent in the United States before 9/11, now is “essential coverage for millions of American businesses.”

The Terrorism Risk Insurance Act, which has faced opposition from government budget cutters, is set to expire in 2014. Blain Rethmeier, a spokesman for the American Insurance Association, which represents property insurers, says it might be best to keep it in place.

“We’ve made significant progress in terms of terrorism, but we still can’t accurately predict terror attacks,” Rethmeier says. “The terrorists alone control that.”

Is your home or car covered in case of a terrorist attack? Check out our story at www.insurancequotes.com/insurance-terrorist-attacks.