Black Swans

To Clean Up a Dirty Fight

A dirty bomb detonated in Manhattan could make a ghost town of the most populous city in the U.S. 
By: | August 3, 2015 • 8 min read

When explosions shook the Chernobyl nuclear power station in 1986, they released enough radioactive material into the environment to kill 30 workers within a few weeks of the incident due to acute radiation poisoning, and sicken at least 100 others.


Large areas of Belarus, Ukraine and Russia had to be evacuated due to high levels of contamination, displacing roughly 335,000 people. A 30-kilometer area around the reactor was completely closed off, and a square mile of contaminated pine forest was cut down and buried.

The explosion in this case was an accident, triggered primarily by the poor training of plant workers, but it demonstrated what kind of long-term damage can result from improper use of radioactive materials.

Before the reactor explosion, 14,000 people called Chernobyl home. The surrounding villages were erected mostly to house plant workers. The City of New York, by comparison, boasts 8.4 million residents and nearly 700 skyscrapers.

The Federation of American Scientists (FAS) took a map of the radiological damage from Chernobyl and laid it over a map of New York City to demonstrate just how many properties, businesses and lives would be impacted by an explosion of radioactive material.

But the FAS scenario isn’t based on a nuclear power plant explosion; it’s based on the possibility of a terrorist “dirty bomb” attack. Dirty bombs, or radiological dispersion devices (RDDs), combine a conventional explosive with radioactive material, and concern is growing that they could be the next terrorist threat.

Research laboratories, food irradiation plants, oil drilling facilities and medical centers are just some examples of facilities that house radioactive elements like cobalt, cesium, plutonium and Americium. The small quantities that these facilities work with are protected as a commercially valuable asset, according to the FAS, but “once radioactive materials are no longer needed and costs of appropriate disposal are high, security measures become lax, and the likelihood of theft or abandonment increases.”R8-15p26-28_02Bomb.indd

The Attack

The FAS focused its scenario on a dirty bomb built with cobalt-60, a radioactive material used in cancer treatment, industrial radiography, sterilization and food preservation. Facilities keep cobalt-60 in the form of small metal rods that are perfectly safe when encased inside therapy units or other machinery, but emit dangerous levels of radiation if the casings and rods are broken and particles of the cobalt-60 are dispersed.

The explosion of an RDD with cobalt-60 would send a cloud of radiation over a radius of at least several miles from the blast site.

“Based on the type, size and location of the device, we predict that in an urban environment, one building will need to be demolished, eight others will need repair, and about 75 more will need cleanup or decontamination,” said Hart Brown, vice president, organizational resilience, at HUB International.

Hart Brown, vice president, organizational resilience, HUB International

Hart Brown, vice president, organizational resilience, HUB International

“The physical nature of the damage will be localized, and small in comparison to the contamination aspect.”

A highly radioactive and powerful bomb could reasonably result in “180 to 200 fatalities, 250 to 300 injured, 20,000 possibly contaminated, and as many as 100,000 to 200,000 that think they could be contaminated,” Brown said.

Mark Lynch, head of terrorism model development on the impact forecasting team at Aon Benfield, estimated that radiation could spread over a 32-block radius from the blast site, which would cover roughly 49 square miles.

A 2003 report titled “Radiological Weapons: How Great is the Danger?” foresaw an even larger impact. This analysis, written for the U.S Department of Energy by George Malcom Moore, a former senior analyst in the Office of Nuclear Security at the International Atomic Energy Agency (IAEA), concluded that even a very small amount of cobalt-60, if dispersed evenly, has the capacity to contaminate 137 square miles.

That would cause millions of dollars’ worth of damage, so imagine what contamination of 621 square miles could do. That’s just what the FAS predicted in its scenario. The simulation surmised that if a tube of cobalt-60, about one inch in diameter and one foot long, were detonated and the particles dispersed from a bomb in lower Manhattan, it would contaminate an area of 621 square miles, or about 300 city blocks.

By EPA standards, lingering radiation from a source of this strength could increase the risk of dying from cancer to one-in-100 for anyone living in the borough of Manhattan.

Within 30 miles of the blast site, the risk remains high at one-in-1,000. Within 75 miles, the risk reduces to one-in-10,000.

In a presentation of these risks made to the Senate Foreign Relations Committee in 2002, the FAS reported that EPA recommendations dictate decontamination or destruction within that 75-mile zone.


“Everybody agrees that not a lot of people will be killed, but not everybody agrees on the amount of property damage,” said Moore, the scientist in residence at the James Martin Center for Nonproliferation Studies. “The big hazard from a dispersion device or a dirty bomb is not killing people, but contamination of property, which is an expensive proposition. You can create an extensive amount of economic loss by doing that.”

The Cleanup

Decontamination is no easy task. Removing the radioactive material would involve sandblasting the top layer off of everything, and repeating the process until radiation levels meet the EPA’s emergency standard, which is twice the normal background level.

(According to the EPA, low levels of radiation exist naturally in the environment at all times. Sources include cosmic radiation from space, radioactive minerals in the ground and radioactive gases like radon and thoron.)

“We’re talking taking the top layer off of sidewalks, off the outer side of buildings, off of all the furnishings inside those buildings,” HUB International’s Brown said. “It could be months to years to get everything cleaned up.”

“Most people who deal with radiation are surprised we haven’t yet had an incident of this type.” — George Malcom Moore, former senior analyst, Office of Nuclear Security at the International Atomic Energy Agency

The FAS suggested that decontamination alone may not be enough. In cases where the risk of cancer could not be reduced to one-in-10,000, total demolition may be necessary.

If all of the buildings within a 1.2 mile area in New York City had to be demolished and rebuilt, the cost could top $50 billion, according the organization’s report, “Dirty Bombs: Response to a Threat.”

Overall, “if such an event were to take place in a city like New York, it would result in losses of potentially trillions of dollars,” the report said.

Even greater than the costs of repair and cleanup, though, is the loss from business interruption.

It’s possible that an exclusionary zone would have to be established until radiation levels fell low enough. Businesses in that zone would be unable to function.

Even companies in the surrounding area would lose a major portion of their customer base; when buildings are able to reopen, it’s likely that former residents and employees will not return, fearing the long-term health effects of any lingering radiation.

Brown referred to this as “radio-phobia,” where people treat radiation exposure as a type of virus they can catch and transmit.

“The fear,” said Aon Benfield’s Lynch, “is usually significantly higher than the actual damage.”

While very high doses can cause acute radiation poisoning and even death, most people will not be physically affected, though fear among the general public persists.

Brown estimates that BI losses could fall anywhere in the range of tens to hundreds of billions.

The Likelihood

The likelihood of a radiological attack using a small amount of radiation occurring within the next decade “is probably greater than 50 percent,” Moore said. “Most people who deal with radiation are surprised we haven’t yet had an incident of this type.”

Many medical facilities have rods of cobalt-60 on site, and they are not always well-guarded.

Video: Authorities in Mexico recovered a stolen truck that has been transporting radioactive material, in this report from ITN News.

That leads to many of what the U.S. Nuclear Regulatory Commission (NRC) calls “orphaned sources,” or small volumes of radioactive material that are uncontrolled, lost, or in the possession of someone not licensed to own it.

The NRC reports that U.S. companies have lost track of nearly 1,500 radioactive sources within the country since 1996, and more than half were never recovered.

Incidents outside of the country have demonstrated how easily the wrong people can get their hands on a radiological device.

In 2013, in the Mexican town of Cardenas, for example, a couple of thieves stole a truck carrying iridium-192, which is used for cancer treatment, to a waste storage facility.

That source was eventually found, but not before six people were hospitalized for radiation exposure.

In the city of Goiania, Brazil, in 1985, a private radiotherapy institute relocated, but left behind some cesium-137.

Part of the institute was later demolished, which destroyed the protective casing around the cesium and led to contamination of the surrounding environment.

Ultimately, about 112,000 people were medically monitored, 249 were contaminated either internally or externally, and four died. It took three years to totally restore contaminated areas to livable conditions.

Response and Recovery

Coverage for any losses stemming from a dirty bomb attack could be difficult to find. In order for TRIA to kick in, the incident would have to be clearly defined as an act of terrorism, but “crime scene contamination makes it more difficult to collect and examine evidence,” Lynch said.

Without a declaration of terrorism by the Secretary of the Treasury and the Secretary of Homeland Security, the losses could be insurmountable for affected businesses to handle on their own.


“When you get into nuclear terrorism, there’s really no ability to predict that loss. It gets complex based on the coverage, and there are a lot of exclusions,” Brown said.

“The federal government would have to provide some economic stimulus, some funds, to prop up the city throughout this timeframe, which again could be years.”

It’s not known whether extremist groups such as ISIS are actively building RDDs, but mishaps like those in Mexico and Brazil and the growing list of orphaned sources make a dirty bomb a very real threat.

In 2012, 160 incidents of lost radioactive materials were reported to the IAEA, 17 of which involved some type of criminal activity.

The NRC and Department of Energy have since made more aggressive efforts to document and locate orphaned sources; here’s hoping they pay off.


Additional 2015 Black Swan coverage:

TURNERWelcome to the ARkStorm

A 45-day superstorm floods California and dishes out economic catastrophe.

R8-15p30-32_03Carrington.inddThe Darkness of the Sun

A fast-moving geomagnetic storm blasts the North American power grid, leaving a large swath of the Northeastern U.S. temporarily uninhabitable.

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.


Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.

R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.


We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?


Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.


Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now and where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.


More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]