FOREWORD AND ACKNOWLEDGEMENTS

FOREWORD AND ACKNOWLEDGEMENTS

This primer is a part of the Multihazard Risk Management Series of publications

that addresses terrorism risk in buildings. The objective of this primer is to introduce the building insurance, finance, and regulatory communities to the issue of

terrorism risk management in buildings and the tools currently available to manage that risk.

ACKNOWLEDGEMENTS

Principal Authors:

Frederick Krimgold, Virginia Tech

David B. Hattis, Building Technology Inc.

William I. Whiddon, Building Technology Inc.

Contributors:

Michael T. Chipley, UTD Incorporated

Wesley W. Lyon, UTD Incorporated

Michael J. W. Kaminskas, UTD Incorporated

Mark Hester, UTD Incorporated

Project Advisory Panel:

Bernard M. Brown, Insurance Advisors, Inc.

Mary Pat Denney, Freddie Mac

Joseph Donovan, Carr America

Dottie Harris, New York State Department of State

Lawrence H. Mirel, DC Department of Insurance and Securities Regulation

Matt S. Munter, EMG Corporation

Technical Review:

Deborah McKinnon, Mortgage Bankers Association

Don Glitz, GMAC Commercial Mortgage

FEMA Advisory Panel:

Christopher Arnold, Building Systems Development

Wade Belcher, General Services Administration

Curt Betts, Army Corps of Engineers

Jim Caulder, U.S. Air Force – Civil Engineer Support Agency

Joseph Coughlin, FEMA

Marcelle Habibion, Department of Veterans Affairs

Joseph Hartman, Army Corps of Engineers

Eve Hinman, Hinman Consulting Engineers

Rick Jones, Naval Facilities Engineering Service Center

Kurt Knight, Department of Veterans Affairs

Howard Leikin, FEMA

Eric Letvin, URS Corporation

John Lynch, Naval Facilities Command (NAVFAC) Criteria Office

Terry Pruitt, Department of Homeland Security

i
ii FOREWORD AND ACKNOWLEDGEMENTS

Christopher Rojhan, Applied Technology Council

Lloyd Siegel, Department of Veterans Affairs

 Project Officer:

Milagros Kennett, FEMA, Building Sciences Technology Branch,

Mitigation Division
CONTENTS

CONTENTS iii

CHAPTER 1

Introduction .................................................................................... 1-1

Intervening in the Building Investment Process ........................... 1-2

Primer Organization ........................................................................ 1-4

Insurance ................................................................................... 1-4

Finance ....................................................................................... 1-5

Regulation .................................................................................. 1-5

Due Diligence for Terrorism Vulnerability Assessment ......... 1-6

Guide to Expertise and Tools ................................................... 1-7

CHAPTER 2

Insurance and Terrorism Risk ........................................................... 2-1

Role of Insurance ............................................................................. 2-1

Terrorism Risk for Insurers ...................................................... 2-1

Building Insurance Industry..................................................... 2-2

Actuaries..................................................................................... 2-4

Insurance Industry Infrastructure............................................ 2-4

Insurance Product Lines ........................................................... 2-6

World Trade Center Insurance Experience ............................ 2-8

Property and Liability ............................................................... 2-8

Business Interruption................................................................ 2-9

Workers' Compensation, Health, and Life ............................ 2-10

Insurance Losses ...................................................................... 2-11

Current Insurance Situation ......................................................... 2-11

Terrorism Risk Insurance Act of 2002 ................................... 2-12

Participation and Reimbursements ....................................... 2-13

Limitations ............................................................................... 2-13

Insurance Risk Management Models............................................ 2-14

Data Needs for Insurance .............................................................. 2-15

Lack of Actuarial Information................................................ 2-16

Future Developments..................................................................... 2-16

CHAPTER 3

Finance and Terrorism Risk .............................................................. 3-1

Terrorism Risk Threat to Lenders .................................................. 3-1

Building Finance Community .................................................. 3-1
iv CONTENTS

Lenders Concerns ..................................................................... 3-2

Terrorism Impact....................................................................... 3-2

Current Finance Situation ............................................................... 3-4

Lender Risk Management Models .................................................. 3-6

Future Developments....................................................................... 3-7

CHAPTER 4

Building Regulation and Terrorism Risk ........................................... 4-1

Terrorism Risk for Regulators ......................................................... 4-1

Regulation of Terrorism Risk ................................................... 4-1

Balancing Stakeholder Interests .............................................. 4-1

Implications for Building Regulation Enforcement .............. 4-1

Current Building Regulation Situation .......................................... 4-3

Code Relation to Terrorist Threats .......................................... 4-3

Regulatory Activities Related to Terrorism Risk ..................... 4-4

Building Regulation Management Models .................................... 4-5

Future Developments....................................................................... 4-6

CHAPTER 5

Due Diligence: Estimating Vulnerability ............................................ 5-1

Fundamental Changes ..................................................................... 5-1

Due Diligence Assessment of Vulnerability to Terrorist Attack .... 5-1

Mitigation of Vulnerability .............................................................. 5-2

Process Model for Terrorism Risk Reduction Used in

Federal Facilities ............................................................................... 5-2

Protection Priority ............................................................................ 5-3

Threat Assessment ............................................................................ 5-4

Defining Threats ....................................................................... 5-5

Identifying Likely Threat Event Profiles and Tactics.............. 5-6

Assigning a Threat Rating .................................................... 5-10

Alternative: Assigning a Level of Protection Against Threat ...... 5-11

Vulnerability Assessment ............................................................... 5-12

Initial Vulnerability Estimate ......................................................... 5-13

Visual Inspection ..................................................................... 5-13

Design Documents Review ..................................................... 5-14

Organization and Management Procedures Review ............ 5-14

Assessment of Vulnerability to Expected Methods

and Means of Attack ................................................................ 5-14

Vulnerability Estimate Screening .................................................. 5-15
CONTENTS v

‘Site’ Questions........................................................................ 5-16

‘Architectural’ Questions........................................................ 5-17

‘Structural and Building Envelope Systems’ Questions ....... 5-18

‘Utility Systems’ Questions ..................................................... 5-19

‘Mechanical Systems’ Questions ............................................ 5-20

‘Plumbing and Gas Systems’ Questions ................................. 5-21

‘Electrical Systems’ Questions ................................................ 5-22

‘Fire Alarm Systems’ Questions .............................................. 5-23

‘Communications and Information Technology Systems’

Questions ................................................................................. 5-24

Additional Sources of Detailed Facility Information .................. 5-25

Vulnerability Reduction Cost Information and Estimates .......... 5-25

CHAPTER 6

Guide to Expertise and Tools ............................................................ 6-1

Terrorism Risk Insurance Act of 2002 ..................................... 6-1

Building Vulnerability Assessment Screening ......................... 6-1

General Glossary ....................................................................... 6-2

Chemical, Biological, and Radiological Glossary ................... 6-2

Acronyms ................................................................................... 6-2

Associations and Organizations ............................................... 6-2

Bibliography .............................................................................. 6-3

APPENDIX A

Terrorism Risk Insurance Act of 2002 ...............................................A-1

APPENDIX B

Building Vulnerability Assessment Screening ....................................B-1

APPENDIX C

General Glossary .............................................................................. C-1

APPENDIX D

Chemical, Biological, and Radiological Glossary.............................. D-1

APPENDIX E

Acronyms ........................................................................................... E-1

APPENDIX F

Associations and Organizations ......................................................... F-1

APPENDIX G

Bibliography ..................................................................................... G-1