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TRANSCRIPT
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THE RENEWAL OF TRIPRAAND THE AMERICAN
TERRORISM EXPERIENCERAA Catastrophe Modeling ConferenceFebruary 2013
Pete Thomas
Chief Risk OfficerWillis Re
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A word from our lawyers
Willis Re Inc. is a reinsurance broker. Willis Re Inc. is not a law
firm. We do not give legal advice and nothing herein constitutesnor should be construed as legal advice. These ideas are offeredfor discussion purposes only and do not constitute legal advice.It is believed that the information used in creating thispresentation is correct, but no representations are made as to its
completeness or accuracy, nor are any warranties made as to itsfitness for any purpose. You and your legal advisors must makean independent assessment regarding all such matters.
Any comments or observations made herein are for academic
purposes only and are not for the purposes of reliance. Any suchcomments or observations do not reflect the views of WillisGroup Holdings or any of its affiliates or any of its subsidiaries orany of its clients.
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Renewing TRIPRA will be alot of work in 2014
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Washington not in the mood for another bail out
Parts of the country without target exposures dontthink its their problem
Conservatives (and think tanks) believe in private
market solutions Politicians and academics, however, are starting to
appreciate that the (re) insurance industry may nothave the capital or the risk appetite to spreadcatastrophic terrorism losses (e.g., NCRBC)
A federal solution is needed
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TRIA 2002 TIRA EXTENSION 2005 TRIPRA EXTENSION
2007
Terminates December 31, 2005 December 31, 2007 December 31, 2014
Make available Must make available coverage forcertified acts of terrorism sameterms and conditions
No change No change
Covered acts Foreign terrorism in USA(including war for WC)
No change Foreign & domestic in USA (WCfor war)
Certification level $5 million No change No change
Program trigger $5 million $5 million through 03/31/06$50 million post 03/31/06$100 million 2007
$100 million
Covered insurance Commercial P&C Commercial P&C, excludes auto,burglary, surety, professionalliability, farm owners multi-peril
No change
Deductibles - % of direct earnedpremium
2005: 15% 2006: 17.5%2007: 20%
20%
Federal reinsurance quota share 2005: 90% 2006: 90%2007: 85%
85%
Industry retention for mandatory
recoupment
2005: $15 billion 2006: $25 billion
2007: $27.5 billion
$27.5 billion each program year
Cap on liability $100 billion No change No change
Terrorism Risk Insurance ActA fulcrum for creating balance
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TRIPRA is a national economic
and defense security issue
TRIPRA is part of our nations economicdefense platform
Post 9/11 it was an economicstimulus tool
Insurance market stability, pricing
consistency, and capacity at risk ifTRIPRA is not extended
Major multi-year developmentprojects at risk if TRIPRA is notrenewed
TRIPRA is not a bailout the recoupmentprovisions place the ultimate burden oninsurers
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Todays talk:
The basic tools for the job
Two centuries of foreign policy
and todays transnationalterrorism
Globalization and the fourwaves of terror
How terrorism ends
Terrorism in America
The precautionary principle
Balance
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Pax BritanniaPax AmericanaAnglo-American World Order
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Foreign policy andtodays transnational terrorismBalfour Declaration
8Source: http://upload.wikimedia.org/wikipedia/commons/c/cd/Balfour_portrait_and_declaration.JPG
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In some parts of the world
The tribe is the critical political unit the nation state is an imposed andartificial geopolitical construct
Religion is a revealed, divine, comprehensive cohesive, spiritual, moral,political, personal, legal and political system there is no separation ofchurch and state
Western democracy is not the preferred form of government Local western foreign policy objectives are perceived to conflict with
western ideals (e.g., Muslim Brotherhood and Hezbollah)
Globalization and technology are perceived to undermine traditional
religious values Globalization is perceived as an extension of colonial exploitation
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Globalization and the four
waves of terror
David C. Rapports The Four Waves of Modern Terrorism
Anarchist Wave (1880s to 1920s)Anti-colonial Wave (1920s to 1960s)New Left Wave ( 1960s to 1980s)
Religious Wave (1979 to )
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Anarchist Wave
Modern terror began in Russia in the 1880s
Anarchist initiated the wave
Took advantage of revolution in communication &transportation
Women: Leaders and operators Tactic: assassinations
Weapon: bombs
Propaganda of the deed
Formalized doctrine and tactics
Revolutionary Catechism by Sergei Nechaev11
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Anti-Colonial Wave
The Versailles Peace Treaty
Victors applied Wilsonian principle of self determinationto break up defeated empires
Undermined their own empires as terrorist groups emerged
in all empires except the Soviet Union WWII enlarged self determination theme as both victors
and losers abandoned territory
Terror campaigns fought where withdrawal not an optionPalestine, Algeria, Northern Ireland
Tactics: eliminate police, hit and run, diaspora sponsors
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Left Wing Wave
Viet Nam War
Internationalism Vanguards for the masses (American Weather
Underground, West German Red Army Faction, Red
Brigade, Japanese Red Army, French Directe) Women: leaders and fighters
Tactics: theatrical targets, hostages, and
assassinations- Americans favorite targetsBetween 1968 and 1982 there were 409
international kidnappings incidents in 73 countriesinvolving 951 hostages
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Religious Wave
Religious doctrines and ethnic identities overlap
Anti- colonialism and secular nation state Islam influencing other religions
Sikhs, Jewish, Aum Shinrikyo, Christian Identity Iranian Revolution
1979 storming of the Grand Mosque in Mecca
Sunni terrorism
Collapse of the Soviet Union
The far enemy
9/11 and aftermath 14
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Religious transnational
terrorism may be different
They have a good powerful story that will survive
generations and appeal to the disenfranchised This story requires a different model with a longer time
frame to put its appeal into perspective.
Historical models to consider 16th and 17th century European Wars of Religion
The Cold War (1917 1991)
The Wars of Decolonization (1945 1997) Islamist political theorists posit a utopian theory of
government that differs from the western view of the
nation state and the separation of church and state
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Influential Islamic thinkers
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Hassan al BannaMuslim Brotherhood
Grand AyatollahRuhollah Khomeini
Sayyid Qutb with the President ofthe Colorado Teachers College
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How terrorism ends
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ecapitation Negotiation Success
ailure Repression Reorientation
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Terrorism in America
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Since the 1700s The
forecast is always stormy
1800s: Europe, UK discounted American experiment
Paid tribute to North African countries1930s: Fascists and totalitarians dismissed us
1950s: Communism will bury us
1970s: The revolution was coming
1980s: Japan & Europe will bury America economically
1990s: The Asian tigers will eat our lunch
2001 : Jihadist caliphate
2010 : China and India will overcome America
2012 : We are bankrupt
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Bombardment of Tripoli-
August 1805
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Unfortunately, terrorism since thefounding of the Republic has been
part of the American experience
The Haymarket Bombing (May 1886)labor
Assassination of Pres. McKinley (Sept 1901)anarchistBombing of US Senate (July 1915)Anarchist bombings of 1919, simultaneous attacks over
half the nationresulted in famous Palmer RaidsBudas wagon Wall Street (Sept 1920)anarchistNazi raid on New York (June, 1942)
PRNPattempt to assassinate Pres. Truman (Oct 1950)PRNP attack on US House of Representatives (Mar1954)
Source: Terrorism on American Soil, Joseph T. McCann, 2006 Sentient Publications
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Unfortunately, terrorism since thefounding of the Republic has been
part of the American experience
Bombing 16th Baptist ChurchKKK (May 1963)
FALN bombing attacks of 1975 (Fraunces Tavern)Bombing of US Senate (Nov 1983)Armed
Resistance Unit
Dalles, Oregon, Americas first biochemical attack(Aug 1984) Rajneeshpuram cult1993 World Trade Center Bombing
Oklahoma City Bombing (Apr 1995)Right Wing9/11Source: Terrorism on American Soil, Joseph T. McCann, 2006 Sentient Publications
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50 foiled plots
Richard Reed December 2001
Jose Padilla- May 2002
Lackawanna Six- September 2002
Lyman Faris May 2003
Virginia Jihad Network June 2003
Nuradin M. Abdi November 2003
Dhirn Barot August 2004
James Elshafay & Shahawar MartinSiraj August 2004
Yassin Aref and MohammadHossain August 2004
Hamid Hayat June 2005
Levar Haley Washington, GregoryVernon Patterson, Hammand Riaz and
Kevin James August 2005 Michael C. Reynolds December 2005
Mohammad Zaki Amawi, MarwanOtheman El-Hindi and Zand WassimMazloum February 2006
Syed Haris Ahmed and Ehsannul IslamSadequess April 2006
Narseal Batiste, Patrick Abraham,Stanley Grant Phanor, NaudimarHerrera, Burson Augustin, Lyglenson
Lemorin and Rothshild Augstine June2006
Liquid Explosives Plot August 2006
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Source: 50 Terror Plots Foiled Since 9/11: The Homegrown Threat and the Long War on Terrorism.
James J. Carafano, PH.D, Steven P Bucci, Ph.D and Jessica Zuckerman, Heritage Foundation, April25, 2012
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50 foiled or failed plots
Khalid Sheikh Mohammed- March2007
Fort Dix Plot May 2007 JKF Airport Plot June 2007
Christopher Paul June 2008
Syngogue Terror Plot - May 2009
Raja Lahrasib Khan March 2010
Faisal Shahzad May 2010
Paul G. Rockwood,Jr. & NadiaPiroska Maria Rockwood- July 2010
Farooque Ahmed- October 2010
Air Cargo Bomb Plot October2010Mohamed Osman Mohamud-November 2010
Antonio Martinez December 2010
Kalid Ali- M Aldawsari
Ahmed Ferhani and MohamedMamdouh- May 2011
Abu Khalid Abdul-Latif and WalliMujahidh June 2011
Emerson Winfield Begolly August2011
Rezwan Ferdaus September 2011
Iranian Terror Plot October 2011
Jose Pimentel November 2011
Sami Osmakac January 2012
Amine El Khalafi February 2012
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Source: 50 Terror Plots Foiled Since 9/11: The Homegrown Threat and the Long War on Terrorism.James J. Carafano, PH.D, Steven P Bucci, Ph.D and Jessica Zuckerman, Heritage Foundation, April
25, 2012
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Boston Marathon bombings
26Source: Stratfor
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Hello, Unit 61398
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China claims cyber attacks
from US based hackers
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DOS and DDOS attacksAre cyberattacks afirst rate
terrortool?
No Government
No Power
No Banking
No Communication
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Just a thought
MAD - the bipolar global framework that prevented rational
leaders from immolating the globe does not seem feasible incyber space or the URW world
Cyberspace is extra territorial there seems to besignificant problems, even in major attacks, identifying the
enemy or distinguishing between terrorism and war
China and Iran are developing significant cyber capabilities
China and the US have a commonality of interests that may
create a political limit on cyber attacks - there are no suchself interest driven restraints with Iran
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Leaving cyberspace:The Southern Poverty Law Justice
Center in 2012 tracked
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1 007 Hate Groups1 360 anti-government Patriot Groups
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American terrorism today
Southern Poverty Law Justice Center watches almost 1,018 UShate groups
Patriot Groups on the rise Militia Groups on the rise Hate groups in every state
Anti-Muslim, anti gay, Black Separatist Groups, ChristianIdentity Groups, KKK, Nativist Extremist Groups, Neoconfederate, Racist Skinhead, White Nationalist
Environmental terrorism
Private law as an anti-terror tool
Source: Southern Poverty Law Justice Center
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A short list of hate groups
34Source: http://www.splcenter.org/get-informed/intelligence-files/groups
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SPL: Patriots & Militia
Groups
35Source: Southern Poverty Law Justice Center
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Radical environmentalist
movement
Two best know groups - $110M damage (1995 to2005)
Animal Liberation Front (ALF)Earth Liberation Front (ELF)
Operation BackfireThe Family
Five states in Pacific Northwest, 20 criminal
acts, 18 members, $40M in damageSuccessful counterterrorist operation
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We are facing an array of
threats but
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It is important to keep suchthreats in perspective
Threats and problems are real
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Threats and problems are realbut weve overcome worse seeWorld War II
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Putting terrorism in the
United States in perspective
9/11 cost US$80B to US$90B
A small percentage of the US GDP of US$10trillionIt is anticipated that the US is sufficiently strong to
withstand most terrorist attacks with few economicconsequences
The effect on macro economic policy is criticalIt is the danger of persistent overreaction that is thereal danger
SOURCE: Economic Consequence of Terrorism in Developed and Developing Countries, ToddSandler and Walter Enders, 2008.
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Worse case thinking
The precautionary principle
Imagining the worst outcome and treating it like acertaintyFocuses on extreme but improbable risks
Movie plot thinkingAntidote
Probabilistic thinking
Reasonable approaches There are, however, threats
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Things to consider in the
quest for balance
Terrorism has been andwill continue to be around
for a long time Globalization,
demographics and thefinancial crisis anddemographics will createnew pools of prospects
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Civil Defense: where do you
invest limited resources?
Most U.S. terrorist activities arenon-catastrophic
Catastrophe terrorism events,however, need the federalgovernment to spread the risk
Un-insurable: Nuclear,Chemical, Cyber, Radiological,Biological ?
The importance of renewingTRIA in 2014
Picture: 1918 30,000 men under Brig. Gen Laubock