Maritime Terrorism: An Empirical Assessment of Risk and Liability

Maritime terrorism is a growing concern: There is a sense that maritime vessels and facilities are vulnerable and that some plausible attacks could have very significant human and economic consequences. Yet this growing concern is not borne out historically: According to the RAND Corporation–MIPT (Oklahoma City National Memorial Institute for the Prevention of Terrorism) Terrorism Chronology, maritime attacks account for only 2 percent of international terrorist attacks over the past 30 years. What's more, previous studies of maritime terrorism are often not based on empirically grounded threat assessments, do not provide comparative analysis of risks, and do not integrate analysis of risk and liability.

A new RAND study addresses this gap, providing an empirical assessment that seeks to determine whether the threat of maritime terrorism is actually increasing, what maritime terrorist scenarios U.S. policymakers should worry about, and whether current civil liability rules will help the private sector manage this risk.

The study finds that the perception of the threat of maritime terrorism has increased, but that assessments of the threat are not empirically grounded. Historically, terrorists have avoided maritime attacks because of a lack of intent and capability (e.g., because land targets are more permanent and more media-accessible and because operating at sea requires specialist skills and equipment and affords limited access). Changes in intent and capability may indeed have increased the threat today, but the study finds that a lack of empirical threat analysis hinders the rational and cost-effective allocation of mitigation resources.

To provide a better empirical basis for understanding which scenarios pose the most risk, the study qualitatively assessed a series of attack scenarios within three categories of shipping: container ships, cruise ships, and ferries. The study assessed the magnitude of the human and economic consequences of such scenarios and the likelihood of these scenarios occurring—determined by terrorist intent and capability and target vulnerability. It found that two classes of risk are most important. First, container shipping attacks are less likely, but some—such as the detonation of a nuclear bomb in a container within a port—merit the attention of policymakers because of their extreme consequences. Second, smaller attacks on cruise and ferry ships—such as on-board bombs and food and water contamination—are important because they are more likely, even though the consequences of these attacks are more moderate.

The authors note that in the United States, the most important approach to managing this risk is through civil liability, which is intended to encourage firms to take appropriate precautions against attack. The study finds that current civil liability standards—which center on negligence liability (i.e., whether firms take reasonable precautions against foreseeable risk)—offer poor guidance to firms on how to avoid negligence and potentially catastrophic liability. Recent jurisprudence on terrorism liability following the 9/11 attacks favors plaintiffs on two core negligence issues: whether defendants owe any recognized duty of care to plaintiffs, and whether defendants took reasonable precautions against foreseeable risk. The study concludes that in light of these rulings, third-party tort liability is likely to become expansive in future maritime attacks—focusing related costs onto commercial interests in a manner that may be difficult to insure.

The study offers a number of conclusions and recommendations. For example, given that many perceptions of maritime terrorism risk do not align with the reality of threats and vulnerabilities, the study argues that policymakers should motivate maritime terrorism policy based on empirical risk analysis rather than perceived threats. In addition, given that the greatest risks to human life turn out to involve on-board bombs or biological attacks on cruise ships and ferries, the study argues that policymakers need to reduce the vulnerabilities of cruise ships and ferries by auditing the soundness of vessel and facility security procedures, improving security measures at ports for passengers and luggage, and implementing vigorous procedures for documenting crew and staff. Finally, given that current tort liability standards provide so little guidance to firms, the study argues that policymakers should review the scope and rationale of third-party liability for terrorist attacks and consider the pros and cons of civil liability as a method for dealing with maritime terrorism risks and injuries.

READ MORE: RAND Study Warns Maritime Terrorism Risk Extends Beyond Dangers Posed to Container Shipping »

Exploring the Link Between Compensation and Insurance for Terrorism Losses and National Security

The recently released report from the Presidential Working Group on Financial Markets will be the starting point for debate next year on the federal Terrorism Risk Insurance Act (TRIA). Much of the discussion around the need for TRIA has focused on whether private markets can provide terrorism insurance, but a chapter by RAND researchers in a new Cambridge University Press book argues that the connection between terrorism insurance and compensation policy and national security provides another rationale for public intervention in insurance markets. High take-up rates for terrorism insurance or other forms of compensation for terrorism losses can enhance economic resilience after an attack and encourage national cohesion and solidarity post-event. Doing so thwarts the aims of terrorists and, over the long run, may deter future attacks.

READ MORE: National Security and Private-Sector Risk Management for Terrorism »

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