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Boston bombing and insurance

By Jay MacDonald · Bankrate.com
Friday, April 26, 2013
Posted: 6 am ET

Last week's horrific bombing attack that killed three and injured 264 at the finish line of the Boston Marathon will likely reverberate in higher business insurance rates charged to promoters of sporting events, according to the catastrophe modeling firm RMS.

"The insurance of sports events is likely to be impacted by the Boston Marathon bombs," says RMS catastrophist Gordon Woo. "So while the property insurance loss is small, the Boston Marathon bombing may well have a significant influence on the terrorism insurance market."

RMS estimates that the insured property damage from Boston's two curbside bombs will likely total less than $1 million, while claims against business interruption coverage will likely exceed that.

'Lone wolf' risks

Calling the Boston Marathon bombings "the first high-profile successful act of terror" since 9/11, Woo says in a statement that the attack fits with the newer breed of "lone wolf" plots designed to inflict maximum casualties and property damage with homemade improvised explosive devices and grenade-size bombs. A foiled 2009 plot to detonate a series of backpack bombs on the New York City subway was one of dozens of such lone wolf attacks intercepted by authorities in recent years, he says.

"With large quantities of explosives being increasingly hard to procure or improvise, the use of smaller-sized lethal explosive devices has been the preferred attack mode in recent plots against the Western alliance," Woo says.

The means, motivation and scale of these attacks make sporting events a prime target.

The threat to outdoor sporting events

"Such events attract large crowds, ensuring that an explosion causes significant injury and loss of life while the media publicity of the event amplifies the terrorizing impact," Woo explains. "High security inside sports arenas forces terrorists to look for softer targets outside; an informal event like the Boston Marathon is substituted for an event such as the Super Bowl or the Olympics. Additionally, deflection to a lower-risk-profile city such as Boston suggests that the perpetrators were concerned security would be higher in (a city like) New York."

The good news, in Woo's view, is that counter-terrorism teams have successfully prevented 90 percent of homegrown terror plots in the United States and Great Britain.

The unsettling news is that, for a while at least, wherever large groups of Americans gather, especially in unsecured settings such as curbside at a marathon or a tailgate party outside a sports stadium, at least some of us will now think to be on the lookout for a madman with mayhem in mind.

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Jay MacDonald is a Bankrate contributing editor and co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters.

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