RMS Provides Cost Estimates for Bioterrorism Attack Simulation Conducted by Dept. of Homeland Security

August 7, 2003

Risk Management Solutions (RMS), a provider of products and services for the management of catastrophe risk, has developed estimates of the economic costs associated with alternative responses to a hypothetical bio-terrorism attack in Chicago as part of a U.S. government simulation exercise.

RMS was a consultant to the U.S. Department of Homeland Security and Los Alamos National Laboratory in analyzing the effectiveness of civil defense decisions in Chicago during the TOPOFF 2 (Top Officials) exercise, conducted by the Department of Homeland Security and U.S. Department of State earlier this year. In Chicago, the exercise focused on how best to respond to a simulated outbreak of pneumonic plague resulting from coordinated terrorist attacks. The exercise also examined the response of local officials in Seattle to a hypothetical “dirty bomb” attack.

RMS analyzed data supplied by Los Alamos National Laboratory, who used the LANL Episims simulation model to produce fine-grained epidemiological information for the disease spread under different response actions in Chicago. RMS provided detailed costing results and observations for an assessment by Los Alamos and the National Infrastructure Simulation and Analysis Center of the cost impact of these responses.

“Many of the response decisions in such situations have a direct bearing on the likely costs borne by the insurance industry, reflecting such coverages as workers compensation and health care insurance,” said Dr. Andrew Coburn of RMS. “Different responses lead to quite different consequences in terms of costs from business interruption as well as personal injury. Our analysis showed that some decisions were clearly more effective and less costly than other decisions – helping to provide a better informed basis for determining appropriate response measures against any real attack.”

The RMS analysis indicated that, in the Chicago simulation, the costs of containing the outbreak – including business interruption losses and costs of treating the population – could be as high as $25 billion under a scenario where the attack response involved shutdowns and closings of businesses and schools keeping 80 percent of the population at home. However, the RMS analysis also determined that an alternative response of “voluntary mass prophylaxis” – rapid delivery of antibiotics to the general population – was highly effective and much less costly, with cost estimates in the range of $1.7 billion to $5.5 billion.

Version 2 of the RMS(TM) U.S. Terrorism Risk Model, to be released in September this year, includes contagious disease as an attack mode and incorporates likely response actions and effectiveness of civil authorities. The RMS model quantifies risk at terrorist targets across the U.S. under a variety of attack modes, ranging from conventional explosives and improvised weapons, to a plausible range of chemical, biological, radiological, and nuclear scenarios. It models, at very high resolution, all the principal agents of damage and loss for each attack mode.

In addition to the probability of various attacks, the model estimates the insured losses stemming from property damage, business interruption, and human casualties.

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