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Terrorism Risk and Insurance Analysis (TRIA)

Since its inception following 9/11, TRIA (the Terrorism Risk and Insurance Act) has provided an important financial backdrop to support offerings of terrorism insurance coverage by the primary insurance markets. While some reinsurers have developed unique and customized programs to support this market, TRIA by far has provided the majority of "reinsurance" to assure that terrorism risk transfer cover was available to those who needed or desired to acquire the financial protection.

TRIA was extended for a two-year period by the US Congress and signed into law by President Bush during the latter days of 2005. As suspected, the extension of TRIA has emerged vastly modified from its prior structure, requiring higher deductible contributions by insurers over the next two years as well as increasing the industry loss event trigger from $5 million to $50 million in 2006, then to $100 million in 2007. The new law also added terrorism risk coverage for Directors and Officers Liability, but did not extend coverage for group life insurance. The Act extension continued its focus of only applying to events caused by foreign-sponsored terrorists and not to domestic events, which was initially included in the Senate's version of the bill.

PIA Summary of TRIA Renewal Bill’s Extension

These changes will likely have the effect of reducing overall capacity to certain portions of the primary market. This may ultimately leave corporations in perceived higher risk areas to compete for lower overall terrorism coverage capacity, with potentially increased deductible contributions and higher pricing.

While the US has not experienced a terrorist attack on the homeland during the past three and a half years, there has been a continued increase in terrorism risk across the world. The face of terrorism continues to morph into new threats of attack, leaving business in the US uncertain about future terrorism risk, adequacy of mitigation efforts, and their ability to provide financial protection for their franchise from this emerging risk.

ABS Consulting has developed a risk-based approach to assist our clients in first identifying and quantifying risk from terrorism perils, and second, in developing a strategy to provide adequate financial protection for the business through risk transfer and/or ART products and services. These services include quantification and analysis for all major terrorism perils, including blast and explosion, nuclear, biological, chemical and radiological releases, for property, business interruption, workers' compensation, group life and emergency planning and business continuity.

Using the support of the Extreme Loads and Structural Group (ELSR) and their proprietary blast and explosion modeling capabilities, ABS Consulting is able to provide detailed blast scenarios, including "swarm" attacks on specific buildings and assets owned and/or operated by the client. With each ELSR senior staff member having in excess of 20 years experience in blast resistant design and analysis, we are actively involved in professional groups developing codes and standards for blast resistant design including the current development of ASCE's Blast Resistant Design Standard. Our capabilities include a working knowledge of blast design criteria including the Interagency Security Committee's Security Design Criteria and the Department of State, and we continue to support blast and explosion analyses for a variety of projects for the GSA, DHS, DOE and commercial clients.

Overpressure Contours from Controlling Blast Threat

Continuing to distinguish us from vendors simply providing "desktop" analyses, ABS Consulting offers our clients a wide range of blast analysis capabilities, including blast load prediction, progressive collapse evaluation, blast resistant building design, window upgrades and retrofit for blast events, to name just a few. These capabilities, combined with our threat scenario development expertise, allows us to offer clients a unique perspective on their actual risk from these type events, as opposed to generic results from a desktop model that does not differentiate exposure based upon key building configurations, construction details, glazing arrangements, CFD analysis, physical security and mitigation features, and other important parameters. The result is a quantified view of actual risk, which can support financial strategies for transferring risk via the traditional or alternative markets.

Model-Produced Damage and Hazard Levels

The determination of risk to property, business interruption and workers' compensation/group life from weaponized biological, chemical and radiological perils, are also supported through internal engineering expertise and dispersion modeling technology which incorporates three-dimensional particle modeling for calculating expected dose and/or concentration of released agent(s). Using ABS Group’s proprietary software, MIDAS-AT (Meteorological Information and Dispersion Assessment System Anti-Terrorism), ABS Consulting can calculate damage, loss and casualties expected from a variety of BCR scenario events targeting actual client locations or proximate high profile targets as considered by the US Department of Homeland Security. These impacts can be converted into casualty rates using loss algorithms developed by EQECAT for the National Commission on Compensation Insurance (NCCI) to categorize loss expectancy by NCCI category for purposes of assessing risk transfer and/or reinsurance requirements for workers' compensation and group life programs.

MIDAS-AT Chlorine Dense Gas Release Footprint Example

MIDAS-AT Anthrax Release Dose Map Example Using Urban Terrain Model

Using its internal engineering, technical and modeling expertise, ABS Consulting can provide clients with a quantified view of risk from a wide range of possible scenarios, and convert these into optimal strategies for protecting the firm’s assets using a combination of risk transfer, mitigation/retrofit, and alternative risk programs (i.e. securitization), in light of market conditions present, including the nonrenewal of TRIA. These are highly respected capabilities and approaches that cannot be supported in a portfolio desktop model for terrorism risk, but which are readily accessible to support clients focused on truly understanding their exposure and in making informed, financial decisions to manage that risk.

For more information, contact:

Kenneth A. Travers
SVP, ABS Consulting/EQECAT
1-302-239-1145 | ktravers@eqecat.com