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Power Blackout Risks Risk Management Options Emerging Risk Initiative – Position Paper

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Blackouts during the last ten years in Europe and Northern America have demonstrated an increasing likelihood
of supra-regional blackouts with accompanying large economic losses. The earthquake, tsunami damage and
power shortages that idled thousands of Japan’s factories in 2011 highlighted its role as a key – and sometimes
the only – source of auto parts, graphics chips and other high-end components. Many manufacturers are currently
using up the inventories that they had in stock before the earthquake. A similar situation could occur as a result
of a larger power outage and this risk may further increase in the future. One reason are insufficient incentives to
invest in reliable power supply infrastructures. But new and smarter grids including storage capacities (e.g. pumpedstorage hydropower plants) are required to handle the future growth of volatile renewable energies, which are
located far away from the centres of demand. Furthermore the vulnerability of the power supply industry, the
industrial and commercial companies and the public and private sector is high due to the interconnectedness
and dependency of all areas on Information and Communication Technology (ICT), navigational systems and
other electronic devices.
Whereas short term power blackouts are experienced frequently on a local or regional level around the world
(e.g. caused by natural catastrophe events like earthquakes, storms, floods or heat waves), societies are not familiar
with large scale, long-lasting, disruptive power blackouts. Traditional scenarios only assume blackouts for a few days
and losses seem to be moderate, but if we are considering longer lasting blackouts, which are most likely from space
weather or coordinated cyber or terrorist attacks, the impacts on society and economy might be significant.
So far insurance companies were not affected significantly beyond taking care of their own business continuity
management in order to mitigate losses following a blackout. Risk transfer via insurance has usually required
physical damage to either the insured’s assets or the assets of specific service providers to trigger a business
interruption claim. But only 20% to 25% of business interruptions, such as supply chain disruptions are related to
a physical loss1
. Therefore insured persons and organisations should be aware that they may face huge uninsured
losses. This might trigger an increasing demand for new risk transfer solutions related to power blackout risks in
the future.
The insurance industry can offer well contained event covers which fulfil the principles of insurance: randomness,
assessability, mutuality and economic viability whereas utilities and governments have to increase their efforts to
make our power infrastructure resilient against such events

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Ketersediaan

EJ20328

My Library

Tersedia

Informasi Detil

Judul Seri

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No. Panggil

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Penerbit

CRObriefing on Power Blackout Risks : ., 2011

Deskripsi Fisik

32 p.

Bahasa

English

ISBN/ISSN

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Klasifikasi

NONE

Tipe Isi

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Tipe Media

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Tipe Pembawa

online resource

Edisi

November 2011

Subyek

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Info Detil Spesifik

Ejurnal

Pernyataan Tanggungjawab

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Versi lain/terkait

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