PROLONGED POWER BLACKOUT (HIGH IMPACT, 1-3 YEARS)
1. Electricity is the backbone of every industrialised society and economy. Increasing dependency on a continuous power supply, be it in the field of industrial production, electronic systems or everyday life, inevitably makes today‘s societies highly vulnerable to power outages.
2. Traditional loss scenarios only assume power blackouts for a few hours or days. However, space weather events or coordinated terror attacks could cause prolonged blackouts with significant impacts on society and industry. Critical infrastructure such as communication and transport would be hampered, heating and water supply would stop, and production processes and trading would seize.
3. Vulnerability to such large-scale power blackouts has increased in recent years due to the combination of increased connectivity and ageing, sometimes poorly maintained power generation and distribution infrastructure and excess usage thereof.
4. A prolonged power blackout could lead to large direct property losses as well as business interruption (BI) and contingent business interruption (CBI), which may even exceed those of large nat cat events. Even though some of the losses feared from past events did not materialise in the end, the potential and magnitude of future losses remains unknown.
CYBER ATTACKS (MEDIUM IMPACT, 1-3 YEARS)
1. Cyber attacks on critical infrastructure are a topic of growing concern. Recent attacks on banks have highlighted that even the financial industry, which spends more on internet security than any other industry, is not fully capable of protecting itself. This gives rise to concerns about the vulnerability of other industries. A cyber attack on a system controlling power, water or transport could disrupt a country’s security,
2. public safety and economic stability. Several cascading attacks could have an even more serious impact and ultimately result in severe social and economic disruption. As information and communication networks have become a fundamental part of a nation’s infrastructure, protecting them is no longer merely recommendable, but has turned into a critical enabler of economic stability and growth.
3. Cyber attacks could trigger BI and CBI covers and thus cause large losses, and several coordinated attacks could lead to higher than expected loss accumulation. The insurability against the risk of cyber attacks has yet to be fully tested.
SUPPLY CHAIN VULNERABILITY (MEDIUM IMPACT, 1-3 YEARS)
1. Globalisation has increased the interconnectedness of risks, and events that occur in one industry or country can rapidly transmit to other industries around the globe. This has been vividly illustrated by the ripple effects of events such as the 2011 earthquake and tsunami in Japan or the floods in Thailand in the same year, which affected industries around the globe.
2. Increasingly complex supply chains together with growing outsourcing activities have increased the likelihood that organisations are caught by surprise and have their operations seriously disrupted. Supply chain disruptions can result from a number of different events outside the control of an organisation such as natural catastrophes, pandemics, cyber risks or terrorism.
3. Increased supply chain vulnerability could result in higher than expected accumulation and correlation of insured losses in the aftermath of catastrophic events, and the dynamic nature of supply chains makes risk assessment very challenging. Furthermore, insurers face the challenge of identifying appropriate means of risk transfer by defining loss triggers that also work without physical damage.
(Source: SwissRe)
