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Former Defense Secretary William Perry estimates at 50 percent the probability of a catastrophic nuclear terror attack on American soil in the next 10 years. Such an attack would kill a million people and cause $1 trillion in damages. Congress should pass legislation that requires international shipping, a deadly Trojan horse for nuclear terror, to carry liability insurance that covers damage to terror victims.
The Port of Houston ranks first in foreign waterborne commerce entering the United States, and is home to the largest petrochemical complex in the world. Fewer than 5 percent of containers shipped to the United States today are physically inspected. Fewer than 10 percent of containers are scanned for radiation, x-rayed or fitted with tamper-resistant locks and electronic tracking.
Congress should require these minimal security measures, but mere regulation is inadequate.
Profit-oriented shippers face incentives to distort information they provide to regulators, and Congress is reluctant to pass antiterror laws, given resistance from highly vocal commercial interests.
Just as the law requires auto insurance so that victims are compensated, the law should require international shipping insurance so that cities can be rebuilt after nuclear terror.
In both cases, drivers and shippers lack funds to pay potential damages to others (negative externalities, in economic jargon). In the case of drivers, insurers charge less for cars with antilock brakes; in the case of international shipping, they would charge less for shippers actively taking antiterror countermeasures, such as multiple-perimeter fencing around loading areas, enhanced searches of vulnerable cargo and the use of American vessels with American crews.
Ships steaming from secure and friendly ports also would qualify for discounts, as they are more difficult for terrorists to penetrate.
No insurance company could pay the hundreds of millions of dollars required to rebuild the Port of Houston after a nuclear terrorist attack on one of its refineries or petrochemical plants. As Sen. John Cornyn, R-Texas, has accurately warned, "The consequence of a successful terrorist attack on the Port of Houston would be astronomical."
The long-term health costs from toxic clouds spreading to the nation's fourth-largest city alone would be immeasurable, not to mention their crippling impact on America's energy industries.
A claim of just $200 billion would bankrupt the entire insurance industry. To protect the industry's viability, Congress in 2002 passed the Terrorism Risk Insurance Act, or TRIA, which commits the federal government to pay 90 percent of claims from catastrophic terrorism. But TRIA does almost nothing to stop terror in the first place, nor does it set aside funding to rebuild.
Like TRIA, the legislation we advocate would limit insurance company liability to prevent the escalating premiums insurers charge for particularly costly risks and ensure the industry's viability.
The liability not covered by insurance companies — probably about 90 percent — would be covered by purchasing insurance from the federal government at market prices.
The bulk of insurance premiums would be paid to the government, and in the case of nuclear terror, the government would do the bulk of rebuilding. In order to decrease the burden on shipping, shippers would deduct from their insurance premiums the import tariffs and taxes they and their customers already pay.
As premiums are accumulated by government and industry for use in case of nuclear terror, they would be invested in a diversified portfolio. If nuclear attacks occurred simultaneously in Houston and New York, for example, these cities, and the American economy, would badly need the influx of such funds.
Shippers with a high security risk, especially foreign shippers, will oppose the legislation, as their prices rise, quantity demanded falls and shipping profits decline. Consumers of imports may resist the measure, as import prices rise. But others will support the legislation: Americans want to protect themselves from terrorism; domestic industry will gain an edge on foreign competition; insurance companies will experience an increase in demand for services; and American investors, workers and taxpayers will be protected against economic disaster.
Finally and most importantly, residents of port cities want to protect themselves and their families.
Insurance is only part of the answer, but it can help. The day after a nuclear 9/11, we will ask ourselves what we should have done differently. Let's make those changes now.
Bleek, Corr and Zenko are nuclear weapons analysts. Corr and Zenko are based at Harvard University in Cambridge, Mass.; Bleek is at Georgetown University in Washington, D.C.