“Even 20 years after the fact, the horrific losses experienced on September 11, 2001, still loom large… and there is little question that 9/11 was and still remains one of the defining events of our times.”
In his keynote address at the International Forum of Terrorism Risk (Re)Insurance Pools (IFTRIP) webinar on ‘9.11: Two Decades of Disruption’, Steven E. Seitz – director of the federal insurance office for the US Department of the Treasury, emphasised the staggering human cost which resulted in the loss of almost 3,000 lives that day.
“[Meanwhile], measured only in terms of the insurance markets,” Seitz said, “total insurer losses amounted to over $45 billion in today’s dollars, making 9/11 the single largest insurance loss in history up to that point and it remains the largest insurance loss resulting from deliberate intent.”
Tomorrow marks the 20th anniversary of the attack and in recognition of that IFTRIP pulled together experts from a range of organisations, associations and government departments to discuss how the disaster emphasised the need for more sophisticated horizon scanning and further consideration about the variety of threats faced by countries.
Nicholas Rasmussen, former director of the US National Counterterrorism Center, noted that in the period after 9/11 there was a natural pivot by the governments of the US and its Western partners to become more acutely attuned to the question of what threats might come next. And so, how national security officials in all of those countries during that period were reading and evaluating intelligence naturally changed.
“The critical thing is the sharing of information because you just don’t know which clue is going to be the critical clue that pieces everything together,” according to Suzanne Raine, former director of the UK’s Counter-Terrorism, Foreign & Commonwealth Office. “And as our world has become so much more about data, it’s become about fragments and how you can make sure that you are logging every single fragment, so that you’re giving yourself the best possible chance to… anticipate how the terrorists might be planning something.”
Collectively, Raine said, counter-terrorism as a global partnership has become very good at suppressing attacks that are being projected into the West from overseas, through intelligence collection and military reaction. A huge number of terrorist attacks have been prevented because of suppressive actions overseas and sometimes that suppressive action has been so early that it’s impossible to say whether or not it would have led to a terrorist attack.
“I think our capabilities in terms of intelligence collection, analysis, cooperation, collaboration, and sharing is light years ahead of where it was just before 9/11,” said Douglas H. Wise, former deputy director of the defense intelligence agency, US. “The evidence is very clear. And I also submit the fact that Allied nations pulled together a global effort to fight this al Qaeda threat.”
Wise noted that, in the business of counterterrorism and intelligence, nothing is ever perfect. Perfect information, analysis and prediction doesn’t exist, he said, and the biggest protection to societies is to have an informed population, and capable, credible and professional local law enforcement. The insurance and reinsurance industry is a key element of this as well, he said, and it’s the insurance industry that provides the leadership, sets the expectations and demands adherence to its standards, otherwise, companies don’t get terrorism insurance.
“It was immediately apparent [9/11] was going to be one of the largest insured losses in history,” stated Robert Gordon, senior VP of policy, research & international for the American Property Casualty Insurance Association (APCIA). “In fact, at the time, ultimately, it did turn out to be roughly tied with Hurricane Andrew for being the most expensive insured loss and it’s still among the top three most devastating losses to date.”
Rupert Atkin, former chief executive at Talbot Underwriting, UK, remarked that, on the whole, the insurance industry coped very well with the claims from the attack on the World Trade Centre. Given that it was completely unprecedented in terms of loss scenarios and that the coverage available was widely given under the consideration of [terrorism] being a non-risk, he said, the claims were generally paid out very quickly.
The real concern, he said, was that it would happen again. People were concerned that this would happen more than just once and if that had happened it would have been a real crisis from an insurance perspective.
“Disaster risk management, which is really what we’re in the business of, goes beyond simply disaster risk financing,” noted Julian Enoizi, CEO of Pool Re & secretariat of IFTRIP, UK. “Disaster risk financing is really paying for the loss after the event, as opposed to what I think we should be doing, which is investing in understanding and planning for these kinds of losses, with the aim that, were they to occur and inevitably they will occur, then the impact of them is less than it otherwise would have been.”
Britt Newhouse, former chairman of Guy Carpenter, US, noted that 9/11 proved that the industry works. This major event happened, he said, losses were paid relatively quickly and there weren’t massive insolvencies - the losses were spread around the world, and premiums and risk-taking adjusted while differentiation that didn’t exist before was instituted for risks that presented less risk. So, the system works and works well.
“Certainly, Pool Re Solutions, the consulting arm of the business, has invested quite a significant portion of the premiums that we collect back into R&D,” Enoizi said. “[That’s] into the understanding of the risk, the modelling of that risk, the pricing of that risk, the mitigation of that risk. And so the second element of that is using all of that consulting information to incentivise the behaviour of the consumer by providing them with premium incentives, premium discounts, if they implement protective security measures. And I think those two things go further to creating long term resilience than simply financing the risk.”
In terms of why it’s so important to remember the events of 9/11, Enoizi said, apart from the terrible loss of life that occurred – the lessons of events such as this should be learned in the same way that they are from natural catastrophes. Each tragic event, which caused losses that were unprecedented at the time, must be used as a learning opportunity. And the industry needs to learn from them, which doesn’t mean excluding them from coverage going forward but rather finding ways to cover them or, if that’s not possible, finding ways to mitigate their impact. That is how insurance as an industry can prove its value to society.
“9/11 should never be forgotten,” Atkin noted. “At a human level, it was an appalling atrocity and a real example of intolerance amongst mankind and really a dreadful attack, an unprecedented attack. And nobody should ever forget the appalling loss of life.”
