Modeling methodologies for risk: Probabilistic modeling estimates losses based on a large number of events. A key factor is the estimated frequency being attached to all the events that could occur. Due to the difficulty in predicting the probability of terror events, there is considerable uncertainty associated with probabilistic terrorism modeling. Exposure concentration analysis identifies and quantifies concentrations of exposures around potential terrorist targets. Target-based accumulation assessments utilize predetermined targets (typically with high economic, human and/or symbolic value) and aggregate an insurer's exposures in and around various distances from these targets. Deterministic modeling represents a compromise between the lack of accuracy in accumulation analysis and the uncertainty surrounding probabilistic models. By imposing an actual event's damage "footprint" at a specified target, a specific, yet hypothetical, scenario can be analyzed with some certainty. Major modeling firms offer an array of deterministic-analysis tools for conventional and nuclear, biological, chemical and radiological attacks at defined target and non-target locations. Compared to natural hazards such as rating agencies and some markets. Insurers, reinsurers and modeling companies are constantly refining their models and the assumptions that underlie their products, thereby increasing their ability to manage terrorism risk in an educated and more quantitative fashion. Currently, deterministic, scenario-based testing is the most common tool used by (re)insurers to assess their vulnerability to terrorism. Click here to register to receive e-mail updates >>