Terrorism

[Zeno]

The following explanation or 'rider' is attached to the recent quote I recevied for Business Liability Insurance. I found it interesting so pass it on for perusal, discussion, digestion, comment or rejection by the 'Other Topics' regulars (or irregulars).


TERRORISM RISK INSURANCE ACT OF 2002
You are hereby notified that under the Terrorism Risk Insurance Act of 2002
(the "Act"), effective November 26, 2002, we must make terrorism coverage
available in the policies we offer. However, the actual coverage available
under our policies for acts of terrorism is limited by the terms,
conditions, exclusions and limits of or by endorsements to your policy or
binder. Coverage may also be limited by generally applicable rules of law
and by the terms of the coverage quote to which this offer is attached.

Any terrorism coverage made available in our policies is partially reinsured
by the United States of America under a formula established by federal law.
Under this formula, the United States will pay 90% of covered terrorism
losses exceeding a statutorily established deductible paid by insurers until
such time as insured losses under the program reach $100 billion. If that
occurs, Congress will determine the procedures for, and the source of, any
payments for losses in excess of $100 billion.
__________________________________________________ ____________

[andyfox]

"Congress will determine the procedures for, and the source of, any payments for losses in excess of $100 billion."

Business as usual.

$100 billion here, $100 billion there, pretty soon you're talking serious money.

[adios]

Insurance companies need a way to hedge risk as to many other business entities in our society. When "Terrorism Futures" were proposed as a way to hedge the risk of terrorism the Democrats screamed often and loudly. Simple question, does terrorism risk exist? And if so is it logical that insurance companies need to hedge their risks? If the Democrats wouldn't have been screaming about Terrorism futures the United States government wouldn't need to be the ultimate hedger of this risk. Yep business as usual, Democrats pandering with irrational arguments.

The Case For Terrorism Futures (http://www.wired.com/news/politics/0,1283,59818,00.html)


The Case for Terrorism Futures


By Noah Shachtman | Also by this reporter Page 1 of 2 next »

02:00 AM Jul. 30, 2003 PT

Critics blasted policy-makers Tuesday for dropping a controversial plan to create a futures market to help predict terrorist strikes.

Legislators like Sen. Ron Wyden (D-Ore.) may have found the Pentagon's Policy Analysis Market, or PAM, "grotesque." But proponents of "idea markets" say PAM's quicksilver cancellation will rob the country's intelligence agencies of a tool with a strong history of accurately predicting future events.

It's a decision that's "pure political," said Bill Adkins, with Neoteric Technologies, which has a Defense Advanced Research Projects Agency, or Darpa, grant to design markets trading on the future of hybrid electric vehicles and the spread of SARS.

Senators expressed concerns when they discovered the PAM project, an effort to speculate on possible events in the Middle East -- like the overthrow of Jordan's monarchy or the assassination of Palestinian leader Yasser Arafat -- as if they were stocks. The higher the price, the theory goes, the more likely the incident.

"The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque," fumed Wyden.

The fact that PAM came from Darpa's Information Awareness Office, the group of minds behind the notoriously invasive Terrorism Information Awareness database project, made the trading floor effort seem even more distasteful.

A day after Wyden and Sen. Byron Dorgan (D-N.D.) held a press conference blasting the program, the Pentagon agreed to drop PAM.

But supporters of the project point out that gathering intelligence is often a messy business, with payoffs to unsavory characters and the elimination of potential adversaries. The futures market, ugly as it may sound, doesn't involve any of those moral compromises, said Robin Hanson, one of the earlier promoters of the concept of trading floors for ideas and a PAM project contributor. It's just a way of capturing people's collective wisdom.

"Among the many things we do for intelligence, this is one of the least reprehensible," Hanson said. "Paying people to tell us about bad things. That's intrinsic to the intelligence process."

And a trading floor could be more effective than paying off a snitch.

Projects similar to PAM, like the Iowa Electronic Markets, which speculate on election results, have been surprisingly reliable indicators of what's going to happen next.

The Iowa market hasn't been perfect -- it forecast a Democrat-controlled Senate in 2002. But over the course of 14 elections, the Iowa Electronic Markets' stock prices were on average a half of a percentage point closer to the results of the actual political races than the final polls were.

The price of orange juice futures has even been shown to accurately predict the weather, noted David Pennock, a senior research scientist at Overture Services who has done extensive surveys on the reliability of such markets.

Traders on the Hollywood Stock Exchange last year correctly picked 35 of the 40 Oscar nominees in the eight biggest categories, according to The New Yorker magazine.

"Market mechanisms are more accurate than asking people their opinions because they're putting their money or reputation on the line," said Ken Killitz of the Foresight Exchange, which speculates on everything from the future of human cloning to the possibility that Roman Catholic priests will be allowed to marry. "It gives people an incentive to reveal what they know."

Markets can be wrong about events, or companies, of course. Just look at the muscle-bound stock prices of flimsy firms during the dot-com boom.

But exchanges "tend to predict events really well when no one person knows the answer -- when information is distributed among many people with different knowledge bases," said Joyce Berg, a University of Iowa professor who helped organize the political trading floors. "Markets have been shown to be really good at aggregating that information."

Markets also bring together people with information about a particular subject in a way blue-ribbon panels of experts can't, added Hanson.

"You get people that know things about a subject, but don't have the credentials to say so," he said. "You get people who live in these areas (of the Middle East)."

There's also "less of an ability to spin" in markets than in policy debates, Hanson noted. "So you get what people actually think, not what they say."

The current flap over the justifications for the Iraq war shows the need for such spin-less interpretations.

Members of the Senate are concerned, however, that by creating a financial market for Middle East events, a terrorist could basically bet on himself, and profit from his strikes.

Senate Minority Leader Tom Daschle (D-S.D.) expressed the feelings of several colleagues when he called PAM "an incentive actually to commit acts of terrorism."

But Daschle has it all wrong, according to Pennock, the market academic.

"The very fact of the terrorist doing that (investing money in an attack) would reveal his hand," he said. Prices would rise as the terrorist invested his cash, and that would tip leaders off to the potential for a strike.

"The market would know something is going to happen that people never would have known otherwise," Pennock added.

There are problems with the PAM system, Pennock conceded. The market only allows for speculating on preconceived ideas. Innovative terror plots wouldn't make it to the PAM trading floor before they were put into action. It seems unlikely, therefore, that PAM traders would have foreseen al Qaeda's use of airplanes as missiles before the terror attacks of Sept. 11, 2001.

Allowing anonymous trades on incidents is a bad idea, Pennock said. There should be audit trails, like in the real stock markets, in order to catch terrorists who might be foolish enough to speculate on their own exploits.

These problems are fixable, he was quick to add.

"I don't think the idea should be dismissed out of hand," Pennock said.

Too late. By early Tuesday, the Senate already had reached its conclusion.[/b]

[jokerswild]

Supposedly the CIA already monitors investment activities from overseas. If 9-11 is an example, it won't matter if they do. The expoentially irregular number of puts placed on UAL stock the week before were traced by the FBI to have come from a subsidiary of Duetsche Bank formerly run by Buzz Krongard, 3rd in charge US CIA. Once this was determined, the investigation dissapeared and Bush sought to withold any further document release from the government.

[andyfox]

"business as usual, Democrats pandering with irrational arguments."

I never said pandering and irrationality were the sole province of the Republicans. (Although I do think they're the true experts at it /images/graemlins/wink.gif.) Certainly the Democrats can shovel it out with the best of 'em. And of course this is an election year.

The problem is exacerbated, I think, because every year is basically an election year. With the campaigns now starting years before the election, and with every member of the House running every two years, everyone is campaigning constantly. I'm not saying pandering and irrationality were non-existent before the days of the constnat campaign. But it certainly makes it more prevalent.

BTW, I showed your post title to my wife. She laughed because she had just used those very words. But that's another subject entirely. . . /images/graemlins/wink.gif