The attack of September 11, 2001, demonstrated that terrorism is capable of inflicting damage and loss of life with a severity that is many multiples of the most extreme U.S. natural perils. This article addresses the need for a mathematical model for evaluating terrorism risk. The author compares and contrasts terrorism risk with other forms of catastrophe risk, and identifies human intelligence and intent as the distinguishing features. The author proceeds to propose that analytical techniques developed and applied within the discipline of wartime operations research (e.g., game theory, search theory), along with specialized statistical techniques, may be adopted to practically model the risk of terrorism. The article proceeds to demonstrate how even a highly simplified model can offer useful insights to the insurance industry with regard to this risk, although access to terrorism expertise is crucial.
[1]
J. Neumann,et al.
Theory of games and economic behavior
,
1945,
100 Years of Math Milestones.
[2]
J. D. Williams,et al.
The Compleat Strategyst
,
1955
.
[3]
E. S. Quade,et al.
Analysis for Military Decisions
,
1966
.
[4]
B. Silverman,et al.
Modeling and Simulating Terrorist Decision-making: A 'Performance Moderator Function' Approach to Generating Virtual Opponents
,
2001
.
[5]
ON THE MULTIFRACTAL DISTRIBUTION OF INSURED PROPERTY
,
2002
.
[6]
QUANTIFYING INSURANCE TERRORISM RISK By
,
2002
.
[7]
Alternative Risk Strategies
,
2002
.