Growing interconnectedness of electricity grids, changing mix of power sources and aging infrastructure require new approach.
The risk of large scale power disruptions is set to increase due to the growing interconnectedness of electricity grids, changing mix of power sources and aging infrastructure, a new study – Power Blackout Risks – Risk Management Options – by the Chief Risk Officer’s (CRO) Forum has found.The earthquake, tsunami damage and resulting power shortage in Japan in March this year once again highlighted the vulnerability of our modern economy to blackouts and disruptions in power supply. Blackouts on this scale can severely disrupt supply chains, lead to idle hours in factory and also have severe social consequence, disrupting public services. Power networks are also vulnerable to weather, cyber and other attacks, and failure through excess demand or aging infrastructure.
The CRO Forum report calls on governments, the electricity industry, consumers and insurers to take urgent action to make the power supply, society and industry more resilient to such events. The new position paper also contains a comprehensive overview of current and future challenges in respect of insurance coverage.
The CRO Emerging Risks Initiative was launched in 2005 to raise awareness of major emerging risks relevant to society and the (re)insurance industry. The initiative is currently chaired by Allianz and consists of nine members representing AIG, Allianz, AXA, Generali, Hannover Re, Munich Re, RSA, Swiss Re and Zurich Financial Services Group.