RMS updates terrorism model
Catastrophe modelling firm, RMS, has updated its probabilistic terrorism model to incorporate new views of terrorism risk for Canada, Denmark, Ireland, Italy and the UK.
The enhanced terrorism model incorporates updates to event frequency to reflect the following trends in terrorism: decline in the frequency of macro-terrorism attacks, decline in the overall threat of large-scale terrorist attacks due to weakened al-Qaida operational capabilities and successful counter-terrorism measures, and continued violence and instability in Pakistan, Iraq and Syria, which provide a safe harbour for terrorist operations and recruitment.
“We have analysed all major global terrorism events in the past decade, as well as changes in the risk landscape for each of the modelled countries, to inform our reference view of the risk,” said Chris Folkman, director, model product management at RMS.
“The updated RMS model shows a 15 to 35 percent reduction in the overall attack frequency of large-scale events for Copenhagen, Dublin, London, Milan, Montreal and Toronto, Rome, and Vatican City. Worldwide, the frequency of macro-terrorism attacks is 85 percent lower in 2014 than in 2006, with a marked decrease over the past six years due to reduced terrorist threat and increased counterterrorism capabilities.”
RMS has also updated the three sets of rates – standard, reduced and increased – in its model. The multiple views of risk reflect varying assumptions about the threat-level to enable model-users to respond to rapid changes in the terrorism risk landscape, as well as perform sensitivity tests on prospective portfolios.
“Our terrorism model is recognised by the industry as the leading tool for pricing, underwriting, capital allocation and accumulation management decision-making for terrorism risk,” said Folkman.
“The model provides a granular probabilistic view of terrorism risk to equip underwriters and portfolio managers with an empirically-driven method of evaluating terrorism risk, enabling them to manage their exposure, set corporate risk tolerances and assess the relative risk between prospective portfolios.”
