While it might have been possible to predict that the WTC was a target, I don't think anyone could have predicted what the expected loss from it would be. It wasn't just the WTC itself that was destroyed; a lot of other effects happened as well.
Interesting article.One of the things that interests me about the process of attempting to integrate some kind of insurance-coverage model into terrorism is the degree to which models like the one in this article take into account any sort of consequential damages. Is $40 billion the actual physical damage plus some allowance for the people who were killed and the direct lost work time for those displaced by the attacks? Does it at all take into account the fact that no one I know was particularly productive for the week following? Indeed, should it?The best example I've seen of taking a large portion of consequential damages into account was the Y2K insurance craze. I'm not sure whether or not this was the result of poorly written policies that insurers concluded would force them to pay Y2K-related claims. I wonder, however, how much good a model of direct consequences of an attack does for the economy as a whole - in other words, how much of the effect of an attack is direct?I definitely agree with the author that the assumption that an attacker is a rational, "value"-maximizing individual is sketchy at best.dan
galagan,"Is $40 billion the actual physical damage plus some allowance for the people who were killed and the direct lost work time for those displaced by the attacks? Does it at all take into account the fact that no one I know was particularly productive for the week following? Indeed, should it?"If you're talking about the WTC loss figure of $40b then you're almost certainly referring to an insurance figure. If that is the case, then the figure represents the lower end of the top-down estimates (as opposed to the sum of individual company's estimates which is much lower) for the bill to insurance companies.This would include;- litigation and claims adjustment costs- $5-10 billion in liability claims (this is where a lot of the variability in the $30-70b figures comes from)- business interruption insurance coverage paidand wouldn't include- business interruption which isn't insurredetcre the article - I read it a couple of days ago and was struck by the good explaination of the two-goat puzzle and how the two different answers could be arrived at (first sidebar in the article)peter xyz
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