While in flight to Boston on the morning of Sept. 11, 2001 and hearing news of the horrific attacks in progress, Hemant Shah's first concern was the fate of the business associates he met with the previous day at the World Trade Center.But as the founder of Newark, Calif.-based Risk Management Solutions (RMS), he must have realized the seismic change the field he helped pioneer-catastrophe modeling-would soon experience.

Last month, the introduction of two competing models that, for the first time, attempt to quantify the risk insurers face from the hands of terrorists offered a slight glimpse into a world where geopolitical issues factor into insurance calculations as never before. "For all of our catastrophe models, and particularly for terrorism, we like to approach the output with a significant degree of humility because there is so much uncertainty," Shah says.

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