Blackoutof critical ServiceS

Do you know your exposure?

urBanization iS a trend that iS taking place around the world.

As the size and population of our cities

swell, so does the demand for energy, water, food,

waste management, communications and other critical services.

But what happens when one or more of these services fail?

a period of time when a service, product, etc. is not available.

Definition:

the high dependency between essential services means that when one service fails, there are ripple effects.

Today,

electricityiS central tothe functioning ofmodern Society.

without it, all of the following would Be diSrupted:

Utilities and sUpplies

pUblic sector transport and traffic

commUnications bUsiness and finance

Water

Food

Waste management

Fuel

Schools

Hospitals

Prisons

Road

Rail

Water

Air

Telephone

Internet

Press and broadcasting

Manufacturing

Stock exchange

Payment and banking services

Utilities and sUpplies

pUblic sector transport and traffic

commUnications bUsiness and finance

Without it, all of the folloWing Would be disrupted:

Depending on how long it lasts and how many people are affected, the consequences of a blackout can be

conSideraBle.

backup facilities are typically only geared up to last a few days.

At present,

a survey by the German government has suggested a widespread blackout could lead to the collapse of modern society

Yet,

after JuSt 2 weekS.

StrikeS, civil unreSt and looting

could reSult.

there are many reaSonS

can and do occurwhy BlackoutS

natural cataStropheS (hurricaneS, earthquake, floodS, Snow)

aging infraStructure and lack of maintenance

human error (conStruction, deSign or operation)

Space weather (Solar StormS, Solar eclipSeS)

wideSpread power outageS are not uncommon:

dUration people affected caUse

several HoUrs

italy

sep 2003 57m

Overloading of lines from power

system fault

11 HoUrs

indonesia

aUg 2005 100mTransmission

line failure

several HoUrs

germany, france, italy, spain, aUstria, belgiUm

nov 2006 10m-15m

Overloaded network after

manual switch-off

2 weeks

cHina

Jan/feb 2008 4.6m Winter storms

several HoUrs

india

JUly 2012 670m Human error

communicationS

BlackoutSare alSo SuBJect to

Image: Youtube

of the world’s international communications are carried by approximately 250 undersea cables?

Damage from a ship’s anchor, fishing net, undersea earthquake or even a shark can cut off communications to an entire country.

Over

Did you know?

99%

ServiceS to 14 countrieS were diSrupted for a total of 18 dayS.

In 2008 an anchor cut three of four cables that lie off the coast of Egypt. These carry 90% of the Internet and telecommunications traffic between Europe and the Middle East.

For example:

Increasing demand for energyDue to urbanization, economic wealth and modern society’s reliance on technology.

Interdependence of critical servicesToday’s services are so intertwined there are usually ripple effects.

Aging infrastructureIncentives to invest in more resilient systems are insufficient.

Privatization of servicesProfitability is often prioritized over reliability.

reaSonSwe are morevulneraBle toBlackoutS

Closure of conventional power plantsThough there are clear benefits, renewable energy sources can be more volatile.

Climate changeExtreme weather events, such as heat waves and heavy rain, are on the rise.

Epidemics/PandemicsThe spread of pathogens across international borders may be the price of globalization.

Cyber attacksOperating systems are under threat from increasingly sophisticated cyber crime.

reaSonSwe are morevulneraBle toBlackoutS

Society and government

to reduce the riSkSmuSt work together

Identify critical processes

and operations.

Involve technical experts and insurers in the development

of risk mitigation strategies.

Invest in more resilient infrastructures

and establish frameworks for their

governance.

Conduct disaster crisis and business continuity

planning.

many inSurerS are not

conSequenceS of BlackoutS.providing cover againSt theaware they are already

Are you?

termS and conditionS vary country to country, But the following are exampleS of common expoSureS:

property

life/HealtH

liability

marine

credit

aviation

Spoiled stock, clean up expenses, costs to repair or replace damaged machinery

Increased morbidity/mortality due to interruption of public health services

Failure to meet supply dates or delivery

of inferior products

Supply chain interruption

Insolvency due to business interruption

Cancelled flights, crashes due to loss of

communication

Soft market conditions are causing an increase in exposure as insurers accept broader policy terms to remain competitive.

aware

Soft market conditions are causing an increase in exposure as insurers accept broader policy terms to remain competitive.

New non-physical damage policies (covering financial losses from the likes of volcanic ash, cyber attacks and weather fluctuations) have huge accumulation potential – approach with caution!

aware

Get in touch with your Gen Re Account Executive or contact:know

theriSkS

© 2015 General Re Corporation and General Reinsurance AG | This presentation is intended to provide background information for our clients and professional staff. It is time sensitive and may need to be revised and updated periodically.

Leo Ronken

+49 221 9738 939

Property/Facultative Senior Underwriting Consultant, Cologne

pe leo.ronken@genre.com