Calculus for Catastrophe; Gordon Woo.(Interview)

Byline: Stefan Theil

In April the International Olympic Committee took the unprecedented step of buying $170 million worth of insurance to cover its operations in case the Athens Games are interrupted by terrorism or war. Such insurance has expanded rapidly since the September 11 attacks cost the industry $40.2 billion. New U.S. regulations require other types of insurers--property, casualty, environmental--to calculate their risk of terror as well. That has meant a lot of work for catastrophists, the specialist mathematicians whose job is to predict the likelihood of the unpredictable: hurricanes, earthquakes and man-made disasters. Gordon Woo, one of the world's leading catastrophists, works for Risk Management Solutions in London. He spoke with NEWSWEEK's Stefan Theil. Excerpts:

THEIL: Why is a mathematician interested in terrorism?

WOO: Mathematics provides a whole new set of tools in the war on terror. There's a mathematical model for conflict called game theory, which is actually an excellent way to simulate how terrorists select targets. We can use mathematical models of network geometry to see what the chances are of disrupting a terrorist network. Say you arrest four people, and you want to know what the chances are that you've disrupted a network or the plan for an attack. Mathematical models can tell us that.

You've developed a Terrorism Risk Model for the insurance industry.

A property insurer, for example, would need to know what his exposure is to terrorism loss. We start with target ranking. If we have two targets, equally attractive, and one is better defended, then that affects the likelihood of being targeted. We then estimate what the average loss would be at any given time, and what the chance is of having a huge loss. To run his business, the insurer needs to have answers to these very practical questions.

What does a mathematician know that security experts don't?