Bruch: Blackouts can originate from a number of causes, often combined. Most common is a surge in demand, for instance due to heat waves boosting air conditioner use. Then there are transmission failures caused by aging infrastructure as already mentioned.
And we all know how events such as floods and earthquakes can lead to failures at production sites. Those failures can also have man-made causes like construction defects or operating errors. Even solar storms have been known to cause fluctuations in grids and electronic infrastructure, for instance destroying transformers.
Bruch: Even shorter blackouts mean high economic losses for companies. A blackout in financial trading could cause a loss of about 6 million euros per hour, and in telecommunications it would be 30,000 euros per minute. To mitigate losses, companies should prepare better first and foremost by assessing their preparedness for blackout events, their own vulnerability and that of their critical suppliers. Such scenarios should be reviewed and tested within a properly managed business continuity plan.
Bruch: The insurance industry has so far provided coverage only in case of physical damage to assets that causes business interruption, meaning only in some 20-25 percent of all cases. However, blackouts might typically lead to business and supply chain interruptions without physical loss. This demands new risk transfer solutions. Covering non-physical business interruption is unknown territory for most insurers.
But in response to these new risks, Allianz corporate specialists are developing highly customized solutions to support multinational clients.
Aichinger: Governments have to establish a clear framework for the governance of power supply infrastructures. This is a necessary step to enhance resilience of power grids against blackout events. But it is the public and private utility operators who have to ensure reliable power supplies. Operational risk management and a good quality business continuity plan can help mitigate the risk. The real message is: be prepared!
As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer.
Link to the disclaimer