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think it shows that we have, because of the War in Afghanistan and because of operations by the U.S. government and intelligence agencies around the world, we have seriously degraded Al Qaeda’s efforts to perpetrate sophisticated attacks.
Unfortunately, that’s the extent of the good news. The bad news is the attack also clearly indicated that Al Qaeda and other terrorist organizations, be they an Al Qaeda franchise or other groups, are still intent on one thing: killing Americans. Killing Americans in the United States is the crown jewel for terrorists. The lesson we need to take away from that incident is that we are experiencing a new war, in some ways, in the terrorist space. It’s a new war against our civilian and economic space.
Since 9-11 we have poured millions of dollars into protecting military assets, here in this country and internationally. The U.S. government, though not explicitly, has essentially said: private sector, you’re on your own. Unfortunately, this has been highlighted in the minds of many terrorist organizations. We’re certainly seeing that with the attack again in various hotels in South Asia and Southeast Asia, attacks on airlines most recently that Northwest Airlines flight on Christmas Day, that terrorists are increasingly focused on what we call in national security parlance, the “soft” targets. Private sector companies right across the country, and indeed internationally, are increasingly vulnerable to terrorist attacks and are increasingly becoming the targets of terrorist attacks.
McDONALD: You talked about a new war on terrorism. Does that mean that nonmilitary targets and non-landmark targets may be more exposed or more likely to somehow be involved?
FINLAY: Indeed. If you look at budgets, defense expenditures, homeland security expenditures since 9-11 alone, you can see that the lion’s share of those investments made by the U.S. government have gone into the so-called high-target regions. It’s Washington, D.C., it’s New York City. What we need to recognize, and again the Christmas Day incident is a perfect example of this is that terrorists are looking for targets of opportunity. The perverse effect of these large investments in protecting New York and in protecting Washington is that terrorists are increasingly looking at other areas. Des Moines could be a target. It’s incredibly difficult obviously to predict where they’re going to attack. We need to remember that, at the end of the day, their intent is not to kill New Yorkers. Their intent is to kill Americans. There are Americans in Des Moines. There are Americans across the country. So clearly, population centers all around the country are a greater target for terrorist activity.
McDONALD: There’s limited terrorism and then there are extreme events. Not only is it likely there might be an effort, would the degree of how extreme the event is be likely to increase?
FINLAY: Yes, absolutely. I’ve prepared a couple of slides as well. If you look and compare losses in the natural disaster space versus the terrorism space, in history you see that even the events on 9-11, the most catastrophic incident here in the United States to date in the terrorism space, the losses don’t come close to some of the larger events. Katrina, even some of the other larger hurricane events, for instance, that struck the United States before 9-11. Unfortunately, there is a growing nexus between terrorists’ interest in perpetrating a massive attack and their capability to do so because of technology flows and so forth. They have increased access to the materials necessary to build either a nuclear or a chemical or a biological weapon.
Looking at that chart, we can see that losses in the past have not, in the terrorism space, reached the losses from a naturally occurring incident. Those are all conventional attacks. We have never had, fortunately in this country, a WMD incident.
The second slide that I prepared is an estimate that looks at potential losses from various potential attacks. In the 1990s, a Japanese doomsday cult named Aum Shinrikyo launched a Sarin gas attack against the Tokyo subway system; 70-some people I believe were killed. Not a lot of physical damage. Although it was a true WMD attack, it had fewer losses than the subsequent attack on the London Tube, which used conventional explosives. But as you move up the scale you talk about dirty bombs and radiological devices, biological weapons. Again those technologies can fall in the hands of terrorists much more readily today than they did even 10 years ago. Certainly the most catastrophic is a nuclear incident. On that third slide you’ll see the American Academy of Actuaries. Again to Laurie’s point: location really does matter, with losses potentially up to $778 billion as a result of a nuclear incident in New York City.
McDONALD: Secondary impacts. Obviously it’s not just the immediate explosion or contamination or whatever. You have all kinds of interruptions and other property damage and loss of habitation or whatever. Do the models get up to that level as well?
FINLAY: They do. Unfortunately the predictive capabilities are even further behind on trying to predict a terrorist incident for obvious reasons than we are in the other spaces.
McDONALD: It’s almost not worth it.
FINLAY: It’s almost not worth it. But we do need to realize that there is not only a growing intent on the part of terrorists to perpetrate an attack like this, there is also a growing capability. This would be a true game changer. These are true company killers, these types of attacks.
McDONALD: Sanjay, put yourself in the shoes of a risk manager, a broker, someone who has stewardship of an organization. You just heard the high possibility of damage from terrorism. What should you do? What are most
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