A little more than a year ago, Britain’s Prince William celebrated his 21st birthday with a costume party at Windsor Castle. While William was addressing the partying crowd, a stranger wearing a black beard, white turban and pink dress and looking a lot like Osama bin Laden bounded onto the stage, grabbed the microphone, spoke to the crowd and then planted a kiss on Prince William’s cheek.
Despite the fact that the Osama look-alike was a comedian, few thought it a laughing matter. If the intruder had been a suicide bomber he could have killed all the senior members of the royal family who were onstage with William. British security forces were promptly taken to task for allowing the stranger to get so close. Immediate steps were taken to beef up security surrounding the royal family.
This summer, while the world is watching the Democratic National Convention (DNC) in Boston, the Republican National Convention (RNC) in New York City and the 2004 Olympic Games in Athens, security forces will be on full alert to prevent breaches like the one that concerned British security a year ago. In Boston, New York and Athens, officials maintain that every precaution is being taken to protect the participants and properties at these events from a close encounter with terrorism.
Armed with updated intelligence and supported with record funding, federal, state and local officials in charge of the summer’s major events have taken unprecedented steps to secure their sites.
“Our goal is to deter any potential attack with multiple layers of security,” Homeland Security Secretary Tom Ridge said during a visit to Boston.
The DNC drew more than 35,000 people for four days from July 26 to 29. The federal government contributed $50 million for security in Boston. Officials deployed thousands of police, closed miles of highway, searched commuters’ carry-on bags, and blocked deliveries of liquefied natural gas to a terminal near Boston Harbor.
Security experts observed what worked at the DNC and will undertake similar efforts for the RNC, scheduled for Aug. 30 through Sept. 2.
The Athens Olympics will spend a record $1.2 billion on security. About 70,000 police and soldiers are ready to be deployed around Olympic venues, ports and other locations leading to the games that will run from Aug. 13 to 29. A seven-nation task force, including the U.S and Britain, is helping. Even NATO is supplying radar planes, ships and an anti-chemical warfare unit.
Terrorism experts will be watching to see how well the summer’s security measures work. They will look to see how close to the center of action terrorists get. Will they get as close as the stranger did to Prince William?
Among those who will be watching very closely is mathematician Gordon Woo. Woo works as a catastrophist with Risk Management Solutions (RMS) in London, a firm that develops models to help insurers calculate the risk of disasters, including terrorism strikes.
Woo says the summer months leading up to the November 2004 elections in the U.S. will provide a critical “laboratory” for better understanding of the risk of terrorism and the effectiveness of defense measures.
“One thing all three of these events have in common is that they are being held at venues for sporting events where it is possible to have good security,” Woo notes of this summer’s three blockbuster gatherings. The DNC was headquartered in the home of the Boston Bruins and Celtics — the FleetCenter — while the RNC will be in New York City’s famed Madison Square Garden and the Olympics will take place in a new sprawling sports facility in Athens.
RMS’s terrorism model reflects the latest intelligence on terrorist groups’ capabilities, as well as the effectiveness of counter-terrorism measures. Under the “worst case scenario,” Woo believes terrorists have great capability and could get close the heart of these events —as close as the comedian got to Prince William.
“Al Quaeda is always a problem and is very motivated,” Woo added. “It would be easier if they targeted only military events and not civilians but that’s not the case.”
The fact that the Democratic and Republican conventions are political in nature is less important to terrorists than the fact they attract big crowds and lots of attention, as do sporting events like the Olympics, and that they are in locations with high name recognition.
“They like the possibility for mass casualties and the ‘oxygen of publicity’ that would follow,” he noted of terrorists.
In assessing the risk and estimating potential damage, models like the one developed by RMS anticipate the heightened security measures taken at such high-profile venues. As Woo describes it, the model assumes there will be more security at the “Statue of Liberty than at a cow shed in Nebraska.”
To help a property insurer estimate the chances and amount of a loss, RMS ranks potential targets. All other factors being equal, a property with enhanced security is ranked as less likely to be targeted and a better risk. The recent successful playing of the European soccer cup competition and Major League Baseball’s All-Star Game shows the value of substantial security expenditures, Woo noted.
However, catastrophists like Woo also consider the flip side of strong security at these high-profile central locations. Given that the “hard” Olympic and convention sites will be under such tight security, the experts will be watching to see if terrorists attack targets on the periphery, such as restaurants and bars, that are less-protected, or at remote locations.
Woo says this principle of deflecting attacks to “soft” locations was evident in the Madrid train bombings and is expected to be part of terrorists’ strategy for the foreseeable future. If something works, they are more likely to try it again.
“It’s a sparring contest between Al Quaeda capabilities and defense capabilities,” Woo explained. “If they can’t get close but want to strike at that time, their activities might be deflected to ‘softer’ targets.”
In addition to taking unprecedented security measures, organizers of this summer’s big events have purchased insurance in the event all prayers and security efforts fail and a terror attack succeeds.
Organizers spent about $2.6 million on insurance for the DNC, according to David Passafaro, president of the Boston 2004 host committee. That was about $1.3 million less than originally budgeted. Boston 2004 paid roughly $2.4 million for its $100 million general liability insurance and another $145,000 in case the convention was cancelled. The premium for adding terrorism coverage was about $86,000, according to spokesperson Karen Grant. The price for the terrorism coverage was lower than the committee expected because the security measures taken reduced the risk.
“It was a no-brainer,” Passafaro said of the decision to purchase the added terror protection.
For the first time, the International Olympic Committee (IOC) has taken out cancellation insurance. The $170 million policy covers the risk of the Athens Games being called off because of war, terrorism, earthquakes or flooding. According to IOC president Jacques Rogge, the policy also covers the bulk of the 28 international sports federations on the Olympic program and the 202 national Olympic committees sending teams to the games.
Rogge said the IOC, which had no terror coverage for the 2002 Winter Games in Salt Lake City, would also negotiate cancellation policies for future Olympics, including the 2006 Winter Games in Turin, Italy, and 2008 Summer Games in Beijing.
Officials with the RNC have been reluctant to disclose their insurance.
Meanwhile, Woo’s concern over “soft” targets appears to be reflected in sales of terrorism coverage to businesses outside the DNC and RNC “hard” centers. Brokers in Boston and New York City report more property owners are taking them up on offers of terror insurance.
“We said to them: ‘Your policy is coming up for renewal, the convention is coming up, and now is the time to buy terrorism insurance,'” Mike Chapman, chief sales officer for Hub New England in Wilmington, Mass., the regional office for insurer Hub International, said.
Chapman told Insurance Journal that out of 25 risks with more than $25 million in property within one mile of the FleetCenter, including banks, hotels and office buildings, 17 bought the coverage. Eight had already purchased it, and an additional nine added it as part of their renewal, Chapman said.
According to Damian Testa, a broker with Kaye Insurance Associates in New York, also part of Hub International, terrorism insurance has become the norm for property owners in the heart of Manhattan since the Sept. 11 attacks. But with the coming of the RNC, clients across Manhattan and into New Jersey are increasingly buying terrorism coverage.
“When you get away from the business section of town, now they are buying it,” Testa told Associated Press. “A year ago, these people said, ‘It’s not going to happen here. Now they’re saying, ‘Why put myself at risk, when it’s just about a 20 percent higher cost on my premium?'”
Sales of terrorism coverage began to take off in the middle of last year, according to a study of 600 large U.S. clients by Marsh, Inc. This study found just 23.5 percent had terrorism coverage in the second quarter of 2003 but less than a year later, in the first quarter of this year, 44 percent maintained such coverage.
According to another Marsh report, business are motivated to purchase terrorism insurance by several factors, including lender requirements, corporate governance and directors and officers coverage requirements, as well as government terror alerts and lower pricing.
Despite all the effort that has gone into securing the summer’s big events, there has been talk that certain events, particularly the November election, might be cancelled or postponed in the event of an attack. But catastrophist Woo advises against such speculation.
“If that is really being considered, it’s an idea that’s best kept secret,” Woo said. “That kind of talk only encourages terrorists.”
A similar version of this article appeared in the Aug. 9 print edition of Insurance Journal.
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