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Article
Publication date: 31 December 2003

Stephen Mixter and Michael Owendoff

The intent of this paper is to provide an overview of the principal provisions of the Terrorism Risk Insurance Act of 2002 (the ‘Act’),1 which became law in the USA on 26th…

Abstract

The intent of this paper is to provide an overview of the principal provisions of the Terrorism Risk Insurance Act of 2002 (the ‘Act’),1 which became law in the USA on 26th November, 2002, and the practical effects which the Act has had on the state of terrorism insurance coverage as it had evolved between 11th September, 2001 and the passage of the Act. The Act voids some of the exclusions which had made their way into insurance policies (particularly post‐9/11) relating to losses from certain ‘acts of terrorism’ (as defined by the Act) and requires insurers meeting certain criteria to ‘make available’ terrorism insurance coverage to their insureds. The Act also establishes a temporary federal reinsurance programme which provides a system of shared public and private compensation for insured losses resulting from certain certified acts of terrorism. From the standpoint of the average insured, however, the practical impact of the Act has been far less dramatic than may appear on the face of it. As The Department of the Treasury explained in its Final Rule,2 one of the main purposes of the Act was to address market disruptions that resulted in the aftermath of the September 11th terrorist attacks on the USA and to ensure the availability and affordability of property and casualty insurance for certain risks associated with acts of terrorism. In addition, the Act was designed to provide a transitional period for the private insurance markets to stabilise, thereby allowing insurance companies to resume pricing terrorism insurance coverage. The Act also sought to build capacity in the insurance industry to absorb any future losses, while preserving insurance regulation and consumer protections in the individual states.

Details

Journal of Corporate Real Estate, vol. 6 no. 1
Type: Research Article
ISSN: 1463-001X

Keywords

Article
Publication date: 1 April 2004

SYLVIE BOURIAUX and WILLIAM L. SCOTT

The US insurance industry has long faced the spectrum of large unexpected losses from natural catastrophes such as hurricanes and earthquakes. However, the September 11, 2001…

Abstract

The US insurance industry has long faced the spectrum of large unexpected losses from natural catastrophes such as hurricanes and earthquakes. However, the September 11, 2001 terrorist attack clearly demonstrated a new form of catastrophic risk of man‐made origin. The damages in property and life are now well known as estimates of insured losses deriving from this event range from $40 to $54 billion. The 9/11 terrorist attacks renewed the capacity problem faced the insurance industry in the underwriting of large catastrophic risk. In that regard, this paper explores the feasibility of capital market alternatives to the conventional insurance mechanism, and analyses whether the capital market could provide extra capacity to absorb terrorism risk.

Details

The Journal of Risk Finance, vol. 5 no. 4
Type: Research Article
ISSN: 1526-5943

Article
Publication date: 1 October 2002

Stephen Mixter and Michael Owendoff

The 11th September terrorist attacks on America continue to affect the corporate real estate industry, and this paper is intended to address a number of those ongoing effects. It…

Abstract

The 11th September terrorist attacks on America continue to affect the corporate real estate industry, and this paper is intended to address a number of those ongoing effects. It first discusses property insurance coverage in general and then proceeds to analyse whether damage from acts of terrorism is covered under pre‐11th September and post‐11th September property insurance polices. It also addresses the current status of proposed US Government intervention as a terrorism insurance backstop. It then describes the strategies which certain clients located within the areas directly affected by the terrorist attacks implemented in order to be able to gain immediate access to alternative space. Finally it examines selected lease clauses to which landlords and tenants should pay closer attention in light of the terrorist attacks, including operating expense provisions, force majeure provisions, waiver of subrogation provisions, use prohibitions and alteration provisions.

Article
Publication date: 1 April 2002

GORDON WOO

Traditionally, terrorism risk has been priced based exclusively on the relationship between supply and demand in the insurance market, with no basis in actuarial principles. This…

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Abstract

Traditionally, terrorism risk has been priced based exclusively on the relationship between supply and demand in the insurance market, with no basis in actuarial principles. This article discusses how the tragic events of September 11, 2001, have irrevocably changed the market for terrorism insurance, since terrorism has become a U.S. catastrophe risk. The author states that since insurers seek to quantify risk distributed over several months (versus a period of only a few days), quantitative assessment of terrorism risk may be achievable. The article proceeds to address the challenge of quantifying terrorism risk, and ultimately suggests that developing quantitative terrorism risk models may provide a foundation for securitizing and trading terrorism risk. The author introduces three examples of potential alternative risk transfer instruments for terrorism risk: 1) a catastrophe bond triggered by workers' compensation claims from extreme terrorism‐related events; 2) a catastrophe bond to cover life insurers from losses related to an attack employing a weapon of mass destruction; and 3) a contingent financing instrument triggered by a terrorism event whose natural buyers are financial short‐sellers.

Details

The Journal of Risk Finance, vol. 4 no. 1
Type: Research Article
ISSN: 1526-5943

Article
Publication date: 1 January 2002

ROBERTA D. ANDERSON

An overview of the economic challenges impacting businesses in the aftermath of September 11. What is the insurance coverage for property damage, dislocation of operation, and…

Abstract

An overview of the economic challenges impacting businesses in the aftermath of September 11. What is the insurance coverage for property damage, dislocation of operation, and businesses interruption?

Details

Journal of Investment Compliance, vol. 2 no. 3
Type: Research Article
ISSN: 1528-5812

Article
Publication date: 19 November 2005

Gabriele Suder and Michael R. Czinkota

Based on a literature review of terrorism and global business literature, this paper addresses those conditions that may lead to new considerations about risk and its management…

Abstract

Based on a literature review of terrorism and global business literature, this paper addresses those conditions that may lead to new considerations about risk and its management at policy and the MNE (multinational enterprise) level. How do MNEs adapt to the 09/11 ‐ type risk in strategic management that shapes choices made for internationalization and for international business operations? It is observed that MNEs increasingly enlarge the notion of political risk. We suggest the development of a strategic risk assessment that incorporates terrorism which in its threat, event and aftermath does not remain local or national, but influences investment, location, logistics, supply‐chain and other performance‐ linked decisions of the international value chain through an enlarged risk‐return evaluation. Using the OLI‐paradigm as a typology, we extend Dunning’s work by incorporating the terrorism dimension. We do so mainly through the analysis and distinction of the most vulnerable links in firms’ value chain in which adjustments need to be made in the face of terrorism threat, act and aftermath. This paper attempts to improve the understanding of international management in an era of global risk and uncertainty.

Details

Multinational Business Review, vol. 13 no. 3
Type: Research Article
ISSN: 1525-383X

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Article
Publication date: 2 November 2018

Vanda N. Veréb, Helena Nobre and Minoo Farhangmehr

The purpose of this paper is to investigate how international tourists’ cosmopolitan values change due to the restraining fear of terrorism, and how this change affects their…

Abstract

Purpose

The purpose of this paper is to investigate how international tourists’ cosmopolitan values change due to the restraining fear of terrorism, and how this change affects their worldview, destination perception and travel preferences.

Design/methodology/approach

In-depth interviews were conducted with international travellers from all five continents to pinpoint the universal shifts in cosmopolitan values, specifically regarding risk perception in the face of terrorism.

Findings

Tourists’ personal values are changing due to the increased risk of terrorism (or the perception of it), which prompts international travellers to act less on their desire for stimulation and more for their need for security when travelling. Just as any change in values tends to be relatively permanent, this value shift might have long-term consequences for the entire tourism industry.

Research limitations/implications

Terrorism risk perception and its retraining effect regarding willingness to travel were established to be significant and universal. However, this study suggests that the strength of the travellers’ cosmopolitan orientation influences the extent terrorism risk is acted upon. Results indicate that the higher the travellers’ cosmopolitan conviction is, the less significantly they seem to be affected by the fear of terrorism.

Practical implications

The study offers cues on how managers and policy makers can enhance destination image that keeps up with the current realities of global tourism in the face of terrorism, and highlights a promising market segment, strongly cosmopolitan travellers who are less concerned with potential travel risks and react less negatively in troubled times.

Originality/value

Most of the previous studies considered tourists’ cosmopolitanism as a stable orientation rather than a context-specific state. This study addresses this gap by exploring how resilient the tourists’ cosmopolitan desire for openness and freedom is under the risk perception of terrorism, and what effect the fear of terrorism has on their travel habits.

Details

International Journal of Tourism Cities, vol. 4 no. 4
Type: Research Article
ISSN: 2056-5607

Keywords

Article
Publication date: 1 January 2006

R. Barry Johnston and Oana M. Nedelescu

The paper seeks to draw lessons for effective policy and regulatory responses to protect financial systems in the face of terrorist attacks.

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Abstract

Purpose

The paper seeks to draw lessons for effective policy and regulatory responses to protect financial systems in the face of terrorist attacks.

Design/methodology/approach

The paper presents data on the reaction of financial markets to the terrorist attacks in New York (2001) and Madrid (2004). It describes the authorities' crisis management responses and analyses their effectiveness. The paper describes the subsequent regulatory responses to protect the financial systems from abuse by terrorists.

Findings

Diversified, liquid, and sound financial markets were efficient in absorbing the shocks of terrorist attacks when supported by well organized crisis management responses.

Research limitations/implications

The paper is limited in its coverage to the reaction of the financial markets to the 11 September 2001, terrorist attacks in New York, and 11 March 2004, attacks in Madrid.

Practical implications

The paper highlights the importance of effective contingency planning by the authorities and financial firms in mitigating the risks of disruption from terrorist attacks.

Originality/value

This paper provides an overview of the issues, challenges and responses in dealing with the risks posed by terrorism to financial systems. It combines empirical evidence with an institutional perspective, and notes some of the regulatory challenges in combating terrorist finance.

Details

Journal of Financial Crime, vol. 13 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 1 April 2002

JOHN A. MAJOR

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…

Abstract

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.

Details

The Journal of Risk Finance, vol. 4 no. 1
Type: Research Article
ISSN: 1526-5943

Open Access
Article
Publication date: 31 December 2003

Shams Rahman and Christopher Findlay

Supply chains in East Asia are being redesigned following the reassessment of the risk of disruption through terrorist attacks. The nature of these risks and of the costs of the…

Abstract

Supply chains in East Asia are being redesigned following the reassessment of the risk of disruption through terrorist attacks. The nature of these risks and of the costs of the private sector responses is reviewed. The research available suggests the costs incurred are substantial. Government regulation applied to security matters also applies within supply chains. It too has been redesigned in response to the change in the risk of terrorist attacks. Examples of its impacts, and its costs and benefits, are presented. Relevant empirical work remains scarce, but principles for government's role can be identified.

Details

Journal of International Logistics and Trade, vol. 1 no. 1
Type: Research Article
ISSN: 1738-2122

1 – 10 of 614