Tuesday, November 29, 2016

Fracking, Earthquakes and Civil Authority

In last week’s post, we discussed the rapid development of the hydraulic fracturing (“fracking”) industry in the United States, and some of the innate risks presented by those operations. In particular, the post focused on a recent study that has found a causal link between wastewater disposal/injection, a by-product of fracking, and earthquakes occurring around high-fracking areas in the United States. Initially, it was speculated that earthquakes were caused by fracking itself, a process whereby millions of gallons of water, sand and chemicals are injected underground to break apart rocks to release gas.  However, it has now been proven that most of these earthquakes are caused by the underground injection of disposal water (see original post for more detail).

The popularity of fracking as an extraction method has extended beyond the United States, and has been readily adopted in countries like Canada, Argentina and Australia with huge shale oil and gas potential. In Canada, the provinces of British Columbia, Alberta and Saskatchewan have the highest concentrations of (fracking) wells. A group of scientists from the University of Calgary has recently released a study evaluating whether there is a causal connection between fracking in western Canada, and an increase in seismic activity around the well-sites. The study revealed that unlike the United States, where earthquakes are induced by the subsoil disposal of wastewater, a series of earthquakes in Alberta within the last five years has been attributed to fracking, or hydraulic fracturing, in which water, chemicals and sand are injected at high pressure into a well drilled in a shale formation to break up the rock and release oil and gas.

According to the study, the quakes were induced in two ways: by increases in pressure as the fracking occurred, and, for a time after the process was completed, by pressure changes brought on by the lingering presence of fracking fluid. To the east in the fault zone, the earthquakes occurred during the fracking process itself, which continued for up to a month after the fracking process was completed. To the west, most earthquakes occurred intermittently over several months after the fracking ended. While Alberta and other affected areas do not have the infrastructural density that Oklahoma has, several major pipelines and operations are found within the proximity of Fox Creek, where these earthquakes have been occurring.

Last week we discussed earthquake coverage and how it may respond to losses caused by human-induced earthquakes. Another, often-forgotten, coverage that may become relevant in the next few years as the risk of earthquakes increases in these areas is Civil Authority coverage. Civil authority provisions are usually written as additional coverage provisions, not exclusions, and provide coverage for lost business income due to an action taken by a civil authority. So, how do civil authority clauses and earthquakes interact? Generally, civil authority claims arise out of the loss of business income due to mandatory curfews, evacuations, or restrictions of access (e.g. Hurricane Katrina, 9/11, etc.).

Following the occurrence of a MW 3.9 earthquake on 23 January 2015, the Alberta Energy Regulator, introduced new regulations for the notifications and monitoring of earthquakes around well areas.  Included among them, was the implementation of a “traffic light protocol” that requires the immediate shutdown of hydraulic fracturing operations following an earthquake of local magnitude 4.0 or greater within 5km of an affected well. While these shutdowns tend to be temporary, an increase in occurrences or severity may result in a long period of operational shutdown. Failure to comply with these procedures may result in an enforcement action which could include the prolonged shutdown of operations.

Other jurisdictions have implemented similar protocols, and some U S. states, and countries have banned this type of operation altogether.

While it is hard to predict the likelihood of a catastrophic event resulting from a fracking-induced earthquake, several of the areas affected by this peril are pipeline and oil/gas hubs. A large enough earthquake or series of earthquakes could result in a prolonged shutdown of operations by order of the relevant regulatory body, thus causing severe business interruption losses to well and pipeline operators. Traditional civil authority provisions read: we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss. Most often, these clauses are also subject to the BI waiting period, and only offer coverage for limited periods of time.

For coverage under Civil Authority provisions, an insured is usually required to demonstrate that the physical damage to its property is the result of a peril covered under the policy. And, as discussed in our last post, insureds will first have to demonstrate that earthquake is a covered peril under the policy, and the denial of access or “action” must be the proximate cause of a loss of business income.

As the risk of fracking-induced earthquakes increases, regulatory authorities may take a harder stance against widespread fracking in the future. In the short-term, a significant enough earthquake may result in the interruption of operations of wells and pipelines surrounding the quake-affected areas. While most of the coverage issues will have to be sorted out on a case-by-case basis, insurers should be aware of this new, or at least unconventional, risk that may affect their insureds’ business operations.

Friday, November 18, 2016

Fracking, Earthquakes and Insurance. What the Frack is Going on?

The advances and proliferation of hydraulic fracturing (“fracking”) in oil and gas exploration and extraction have provided the United States with tremendous benefits with respect to previously unaccessible fossil fuels. Those benefits, however, come with a price. Among other complaints about the negative impacts of fracking, it now seems certain that the wastewater injection process associated with fracking can and will cause earthquakes of varying degrees of severity. In a study published in the September 2016 issue of Science, Stanford University researchers demonstrate a causal connection between the fracking wastewater disposal/injection process and a series of earthquakes in east Texas, including the largest earthquake ever recorded in that region. A study published earlier this year found that fracking itself was inducing earthquake activity. The authors of the study concluded that the danger of earthquakes caused by “hydraulic fracturing has received less attention than that from wastewater disposal, but it is clearly of both regional and global importance,” and that “the likelihood of damaging earthquakes and their potential consequences needs to be carefully assessed.”
While the United States Geological Survey has been traditionally more reluctant to confirm that fracking and wastewater injection are responsible for the rash of seismic activity in and around the areas where fracking is taking place, they have at least officially acknowledged that at least some of the observed earthquakes have been caused by fracking wastewater injection. In a study released in April 2015, the USGS identified 17 areas within Alabama, Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma, and Texas, as showing sharp increases in seismic activity due to injection of wastewater in deep wells.
And it stands to reason that fracking operations are triggering earthquakes. Earthquakes are now just as likely to occur in Oklahoma as they are in California. Just last week, Cushing, Oklahoma sustained an earthquake of a 5.0 magnitude. Cushing is the largest oil storage hub in the world, holding billions of dollars worth of oil, and is nicknamed the Pipeline Crossroads of the World. While the storage infrastructure and pipelines did not sustain major damage, more than 40 buildings in Cushing sustained severe damage spread over a 16-block area and dozens of people were displaced. Oklahoma regulators said they would shutdown some disposal wells and reduce volume in others following the earthquake. 
The earthquake in Cushing was just the sixth 5.0 earthquake to hit Oklahoma since 1882, but 3 of those 6 major earthquakes occurred in 2016, including the strongest earthquake in Oklahoma history, a 5.8 Mw earthquake in September. In 2016, Oklahoma sustained 518 earthquakes of 3.0 magnitude or higher. From 2004 to 2008, right before the fracking oil boom hit, there was a total of nine. George Choy, a geophysicist with the U.S. Geological Survey, was quoted by USA Today as saying "The oil companies have said for a long time that these are natural earthquakes, that they would have occurred anyway, but when you look at the statistics, that argument does not fly."
Generally speaking, losses due to the peril of earthquake/earth movement, are typically excluded from coverage under standard commercial all-risk property policies. However, most carriers will give policyholders the option to purchase this coverage through an endorsement to the policy. And, in historically seismically stable areas, such as Oklahoma, such an endorsement might have been offered at a premium price that no longer corresponds to the risk. 
Some insurance regulatory bodies are taking proactive steps to prevent uncertainty regarding property insurance coverage for fracking-related earthquake damage. The Pennsylvania insurance commissioner has prohibited insurance carriers from denying homeowners insurance claims for earthquake damage on the basis that the quake was caused by fracking. In Oklahoma, the insurance commissioner required insurers to give official notice to policyholders as to whether or not coverage extends to earthquakes resulting from fracking. 
Despite these steps, it presently appears that most of the coverage questions surrounding fracking-related earthquake damage have yet to be answered. Given the variation in property insurance policies, the first questions will center on whether or not earthquake damage is covered or excluded under the policy wording. If earthquake damage is excluded, perhaps there is supplemental coverage for a resulting fire or water damage by virtue of a covered ensuing loss provision? Or coverage might be eliminated completely by an anti-concurrent causation provision? Perhaps the policy/endorsement covers earthquakes but excludes earthquakes or earth movement caused by non-natural or man-made causes such as fracking. What evidence might an insurer need to bring to court to prove that some earthquake damage was definitively induced by fracking operations as opposed to natural seismic activity. Additionally, if an insurer pays insurance proceeds under any of the coverage scenarios outlined above, what evidence will be required to make a recovery from the oil and gas extraction firm through subrogation?
While these issues will need to be sorted out on a case-by-case and policy-by-policy basis, it seems that it would behoove property insurance carriers to make certain they are aware of the new seismic coverage risks they face in traditionally stable areas in North America.
Posted by Matt Gollinger

Tuesday, November 15, 2016

Zika Claims Fly In

The Zika virus is a mosquito-borne flavivirus that was first identified in Uganda in 1947. Although the primary form of transmission is mosquitos, there have also been reports of sexually transmitted cases of Zika. Adults infected with Zika virus may not display any symptoms. If they do manifest symptoms, they range from fever, rash, joint pain, conjunctivitis, muscle pain and headache. These symptoms can last for several days to a week and are commonly confused as being the flu. 
While the virus is not fatal to adults, it presents severe complications for fetuses and infants. The CDC reports that Zika infection during pregnancy can cause a birth defect of the brain called microcephaly and other severe fetal brain defects. CDC also reports that in areas affected by Zika other problems have been detected among fetuses and infants infected with Zika virus before birth, such as defects of the eye, hearing deficits, and impaired growth, as well as increased reports of Guillain-Barré syndrome, an uncommon sickness of the nervous system.
According to the Centers for Disease Control and Prevention, as of late October, there were 32,814 confirmed Zika cases in the U.S., including 4,091 cases in the continental U.S. and 28,723 confirmed cases in the U.S. territories of Puerto Rico, the U.S. Virgin Islands and American Samoa.

Source (

In Florida, the number of reported Zika cases to date has risen to 1,144, with 915 stemming from people who brought the virus into the state after being infected elsewhere. Florida has had three identified Zika Zones where there have been local transmission of Zika virus. The first Zika Zone in Wynwood was announced on September 19, 2016. The Wynwood Zika Zone was originally about one square mile. After 45 days of localized spraying and public quarantine announcements, the Zika Zone designation was lifted when was no evidence was found of active Zika transmission. The second identified Zika Zone is about 4.5 square miles in Miami Beach within the boundaries of 8th and 63rd streets.

The third Zika Zone is about one square mile within the boundaries of NW 79th Street to the North, NW 63rd Street to the South, NW 10th Avenue to the West and North Miami Avenue to the East.

The spread of Zika is not only terrifying for overall public health and safety, but this well-publicized health problem also has a chilling effect on Florida’s lifeline, tourism. In 2012, Florida welcomed 89.3 million visitors who spent $71.8 billion. In 2014, the state tourism data estimated 97.3 million people visited Florida. In the first six months of 2015, Florida welcomed 54.1 million visitors. The majority of those tourists (about 96%) come into the state through Miami. Miami International Airport is the state's busiest for international travelers, who make up 70 percent of all foreign visitors to Florida annually. That overall revenue comes from individualized tourism, as well as the appeal of hosting events in Florida.
The emergence of Zika Zones in South Florida has caused major concerns for travelers and directly impacted the hospitality industry. This is noted in the recent emergence of Zika-related event cancellation claims that insurers are receiving. These lines of viral demarcation now become pivotal pieces of claim and adjustment information as Zika related cancellation claims begin to fly in. 
The key to addressing these claims, as it is with all insurance-related issues, is to perform a thorough review of the governing policy language in determining coverage. Event cancellation policies are not standard, and the indemnity language may be tailored to the insured’s traditional business needs. On the one hand, you may have language that may recognize a Zika Zone as a related peril, such as the following:
Coverage Extension.
A. Cancellation of Bookings - This Policy is extended to cover a loss sustained by the Insured resulting from the cancellation of, and/or inability to accept booking or reservation from accommodation and/or interference with the business at any Insured location sustained as result of the occurrence of:

2.  contagious or infectious disease

*          *          *
5.  any of the following:
            a.         outbreak of contagious and/or infectious disease

within a radius of 25 miles of the Insured Location to the extent such Time Element loss is not otherwise covered under this Policy such as under the Civil or Military Authority or Ingress/Egress Extension. 
Or, you may have an event cancellation policy that contains language similar to the following:
INSURING CLAUSE - Subject always to the terms, conditions, limitations and exclusions contained herein or endorsed hereon:
1. This Insurance is to indemnify the Insured for their Ascertained Net Loss should any Insured Event(s) be necessarily Cancelled, Disrupted, Rescheduled which necessary
Cancellation, Disruption or Rescheduling is the sole and direct result of a cause not otherwise excluded which occurs during the period of insurance and is beyond the control of both the Insured and the Participant therein.

2. This Insurance also indemnifies the Insured for proven additional costs or charges reasonably and necessarily paid by the Insured to avoid or diminish a loss payable hereunder, provided such additional costs or charges do not exceed the amount of loss thereby avoided or diminished.

3. The Underwriters' maximum liability shall not exceed the Limit of Indemnity stated in the Schedule for the relevant Insured Event(s) nor the Aggregate Limit of Indemnity stated in the Schedule.

EXCLUSIONS - This Insurance does not cover any loss directly or indirectly arising out of, contributed to by, or resulting from:

20. any communicable disease or the threat or fear of any communicable disease whether actual or perceived. A communicable disease means an illness caused by a pathogen and transmitted from an infected person or animal to another person or animal. 

The determination of coverage for Zika-related event/booking cancellation claims under each respective policy will have divergent results. However, the complexity of handling these types of claims does not cease with the analysis and application of policy language. The process of adjusting the claim itself requires relentless attention to detail and the ability to pilot insurers through murky waters.  
The best way to deal with these unique claims is to prepare yourself with the most effective and knowledgeable adjustment team, which starts with knowledgeable counsel. In these trying times of Zika Zones and cancellation confusion, Zelle is poised to help guide insurers and its insureds in the handling of Zika-related event cancellation claims.  

Friday, November 11, 2016

Global Hail: India

India has a warm and moist climate – ideal conditions for thunderstorms and hail.   India’s hailstorms frequently cause property damage and injuries to people and livestock.  The most damaging storm hit India on April 30, 1988, resulting in deaths to approximately 250 people and 1,500 livestock.   A hailstorm of that intensity has not happened in India since, but hail remains a common occurrence there. 

For example, in March 2014, ten thousand villagers of the Madhya Pradesh were adversely affected by a severe hailstorm and suffered heavy loss to the Rabi crop (wheat, cereals, millets, pulses and oilseeds). The 2014 storm was noteworthy because two-thirds of India’s population is dependent on agriculture for their livelihood. After the March 2014 hail storm, Agriculture Insurance Company of India (AICI), a carrier part of the National Agricultural Insurance Scheme (NAIS), denied liability.

Insurance issued through AICI is compulsory for all farmers who access seasonal crop production credit from the lending institutions and is voluntary for non-loanee farmers. NAIS has three overall objectives: (1) provide a measure of financial support to farmers in the event of crop failure as a result of an insured peril; (2) to restore the credit eligibility of farmers after a crop failure for the next season; and (3) to support and stimulate the production of cereals, pulses and oilseeds.

AICI insures against yield loss due to non-preventable risks, including damage caused by hailstorms. AICI developed a complex weather index program which has subsequently attracted government premium subsidies. Government financial support for the NAIS is split between the federal government and the state and union territory governments. Since AICI is heavily subsidized by the government, banks market and administer the NAIS scheme on behalf of AICI. The banks’ charges comprise 5% of AICI’s premium while operating costs amount to another 2% of premium. Because the AICI operates at a low overall cost structure, the company maintains low premiums for farmers.

Litigation resulting from AICI’s denial of claims resulting from the March 2014 hail storm was later considered by the Madhya Pradesh High Court. The bench of justices SK Gangele and Sheel Nagu ordered the company to process all the farmers’ claims under the scheme and compensate for the losses. This marked the first time that insurance claims for crop loss due to hailstorm were ordered to be paid by AICI.

Despite the ultimate outcome of the 2014 hailstorm litigation, it seems that Indian farmers are still skeptical of crop insurance programs. Only 42.82 million hectares (or 22 percent) of crops were covered by crop insurance in 2014. Furthermore, the average sum insured (maximum amount that insurance would pay in the event of crop damage) is far below the gross value of output for most crops. The combination of these two factors likely deters many farmers from investing in crop protection. However, in 2016, the Narendra Modi government implemented a new crop insurance scheme with lower premiums.

Because India’s agriculture industry remains critical to its economy, and weather conditions are favorable to hailstorms, crop insurance for hail damage should play an important role in the future of India’s insurance market, and other jurisdictions experiencing similar damage to crops from hail may look to India for guidance in addressing such claims.

Wednesday, November 2, 2016

Adding Fire to the Fuel

For the second time in as many months, a pipeline supplying gasoline to millions of people on the U.S. East Coast was shut down.  On Monday, October 31, 2016, Colonial Pipeline Co. shut down its main gasoline and distillates pipelines in Shelby, Alabama after an explosion and fire occurred when a repair crew hit the gasoline pipeline with a trackhoe, igniting its contents.

Colonial Pipeline, based in Alpharetta, Georgia, operates 5,599 miles of pipelines, and transports more than 100 million gallons of gasoline, jet fuel, home heating oil, and other hazardous liquids per day from the U.S. Gulf Coast to the New York Harbor area.  At the time of the explosion, a nine-man crew was working on the Colonial Pipeline system intending to restart a section of the pipeline that one month earlier (September 9) suffered Colonial’s biggest gasoline leak in nearly two decades.  The September 9 leak released as much as 8,000 barrels (336,000 gallons) of gasoline in Shelby County and led to days of dry pumps and higher gas prices in Alabama, Georgia, Tennessee, and the Carolinas while repairs were performed.  We understand that the cause of the September leak remains undetermined.  But the restart has been planned for mid-November after removal of a bypass line that was installed following that leak.

According to the U.S. Energy Department, the Colonial Pipeline system is the biggest refined products system in the United States, and is responsible for supplying about one-third of the 3.2 million barrels of gasoline consumed per day on the East Coast.  The effects of the latest disruption were not immediately clear.  But there appears to be concern that the explosion creates the possibility of another round of gas shortages and price increases.  In fact, U.S. gasoline futures jumped on Monday as much as 13% to $1.6351 a gallon—their highest since early June—following news of the explosion.

According to PHMSA data, the pipeline has already had five spills reported in 2016 in Alabama, including the one in September.  And, pipeline safety has come under increased scrutiny in recent months following a dispute over Energy Transfer Partners’ 1,100-mile (1,770-km) North Dakota Access Pipeline.

It is uncertain how these recent events will impact the oil and gas industry.  One can certainly expect oil and gas consumers on the East Coast to feel the pinch.  This could result in business interruptions generating insurance claims separate and apart from any claim for damages sustained by Colonial Pipeline from the explosion.  Daily fluctuations in fuel prices could impact these claims and, as such, insurers should pay close attention to prices during any claimed period of interruption.  Separately, given the increased scrutiny for pipeline safety that appears to have resulted from recent industry events, insurers can expect increased delay claims for future losses as regulatory agencies become more involved in the investigation and repairs.     

Posted by Matt Gonzalez

Winter is Coming

Winter is coming! So says the time-honored long-range weather prognosticator, the Farmer’s Almanac. Following a mild winter in 2015-2016, weather forecasters from the Farmer’s Almanac are expecting a colder than average winter, at least in the East. Although the rest of country may skate by with milder than average temperatures brought on by a weak La Niña in the Pacific, the insurance industry should be prepared for an "avalanche" of claims in the Northeast.

It bears noting that catastrophic winter storms occur every year, even during mild winters. From 1995 to 2014, winter storms caused about an average of a $1 billion of catastrophe losses each year. The 2015-2016 winter was the warmest December-February period in 121 years and it still caused more than $1.5 billion in insured losses and spawned Winter Storm Jonas (aka Snowzilla), which was one of the heaviest snowstorms ever in several Eastern cities. So, even if the 2016-2017 winter is milder than expected, it is little guarantee against the threat of devastating winter storms.

Interestingly, scientists predict that climate change will, perhaps counter-intuitively, increase the severity of winter storms. Warmer ocean surface temperatures can result in higher levels of moisture in storms and greater intensification. Not only that, snowfall during higher temperatures closer to the freezing mark produces wetter and heavier snow than snow that falls during more frigid temperatures. Heavier, wetter snow causes more roof collapses and damage from downed tree limbs than dryer, lighter snow that forms at colder temperatures. Indeed, there were around twice the number of extreme snowstorms in the second half of the 20th century than the first. 

Roof collapses are probably the most common claims caused by winter storms. The weight of snow and ice produced by a winter storm invariably causes such collapses. Additionally, wind combines with the snow and ice to bring down tree limbs, often on structures and other property.   By definition, a blizzard – winds in excess of 35 mph with visibility less than ¼ mile for at least 3 hours – unleashes high winds.   

Of course, it does not always take a storm to produce winter-related claims. Cold temperatures cause damage to frozen pipes and create ice dams every winter, especially when temperatures plummet in the Midwest and Northeast. Policies often exclude damage from burst pipes unless the insured has taken reasonable measures to protect the building from heat. Even fires are more likely during the winter. So get ready now because winter is coming!!!!

Posted by Seth Jackson and Jeff Gordon

Tuesday, November 1, 2016

Space Weather Events – From Post-Apocalyptic Fiction to Executive Order for Catastrophe Preparedness

Has anyone taken note of the recent proliferation of novels written in the genre of post-apocalyptic fiction?  Apparently, the U.S. government has.  On October 13, 2016, President Barrack Obama issued an executive order aimed at preparing the nation’s infrastructure for space weather events that could potentially wreak havoc on society as a whole.

But what are space weather events?  Space weather events are normally thought to include solar flares, solar energetic particles and geomagnetic disturbances to mention a few.  These space weather events according to NASA and echoed in President Obama’s recent executive order occur regularly with some measureable effects on critical infrastructure systems and technologies, such as global positioning systems (GPS), satellite operations and communications, aviation, and the electrical power grid.  Extreme space weather events – those that could significantly degrade or entirely destroy critical infrastructure – could disable large portions of the electrical power grid resulting in cascading failures that would affect key services such as water and food supply, healthcare, transportation and even the financial system.

As noted in President Obama’s October 13, 2016 executive order, the key to staving off the effects of extreme space weather events would be the state of national preparedness for such events.  In this regard, the recent executive order indicates that successfully preparing for space weather events is an all-of-nation endeavor that requires partnership across governments, emergency managers, academia, the media, the insurance industry, non-profits and the private sector.

But has the insurance industry given much thought to preparing for potentially societal disrupting events such as these?  The quick and unfortunate answer appears to be NO.  If the insurance industry had given any thought to preparedness for such space weather events, they would now be including such space weather events in their general policy exclusions and treating them much like the exclusions for “hostile or warlike action” or “nuclear reaction, nuclear radiation or radioactive contamination.” In most instances, property insurance policies specifically and unequivocally exclude loss, damage or expense caused by or resulting from these perils regardless of any other cause or event that contributes currently or in any sequence to such loss or damage.

The obvious question is why should the insurance industry treat “space weather events” with such absolute exclusion status?  Well … because nothing is immune from such a space weather event.  First and foremost, due to the interdependencies of modern society, the insurance industry could face potential claims across all sectors of society including power generation, transportation, financial services, agricultural, communications and the list goes on and on. 

Additionally, the potential loss or damage from space weather events could range from no physical loss or damage to complete societal breakdown.  So, the only logical way for the insurance industry to prepare is to exclude such space weather events from all aspects of insurance coverage.

With that said, if no such all-encompassing exclusion is added to current insurance policies, what could the insurance industry anticipate and how would it respond to such an event?  In a worst case scenario, no one need worry because life on Earth would cease to exist.  In a less extreme example, such as a super solar flare or extreme geomagnetic storm, society would likely face a loss of the electric power grid for some unforeseen period of time.  In this situation, there would likely be covered physical loss or damage to which most property insurance policies would respond.  There is also the potential for such space weather events to produce an electromagnetic pulse (EMP), which could cause the loss of most unhardened electrical systems and components.  Or, during a geomagnetic storm, induced ground currents could potentially melt copper windings of transformers, crippling the power grid.  And, as you undoubtedly recall from the massive power outage on August 14, 2003, our national power grids are more vulnerable than people want to contemplate.

The loss of our national power grids, however, is only the tip of the iceberg.  The loss of the power grid as result of a space weather event with resulting EMP effects could potentially devastate all sectors of society because of the interdependencies of modern social infrastructure.  If the power grid was lost from EMP resulting from a space weather event, one could reasonably anticipate the almost immediate loss of transportation; fresh water; food and medicine with no means of transport for resupply; communications and an inability to produce or supply fuel.  In such a situation, it is not difficult to foresee a complete collapse of the financial and monetary systems either.  For example, an EMP from a space weather event could not only destroy the ability to electronically transfer funds, but also prevent access to electronic financial records.  On a more personal level, people would not have access to funds through banks or ATMs, potentially leading to a collapse of the monetary system.  Any local trade would likely be through barter or perhaps the new currency would be … ammunition!  As these few examples demonstrate, the financial and social effect of a space weather event could be incalculable.

But what if you wanted to make an insurance claim from such an event?  The first thought that occurred to me was how … there is no electricity or operating financial system.  Obviously, any response from the insurance industry would depend on the severity of such a space weather event and its resultant effects.  The above examples may seem far-fetched but are simply used to illustrate the potential difficulties the insurance industry could face from a space weather event.

Consequently, the insurance industry faces a host of problems in even considering President Obama’s call to arms in preparing the nation for space weather events.  In a utopian world, the insurance industry could potentially assist in shouldering a portion of the burden of recovering from such a space weather event … but would the insurance industry exist afterwards?  Who knows?  However, in the real world, and in light of the potential broad spectrum impact on society from a space weather event, the insurance industry should use foresight instead of hindsight and begin excluding such space weather events for all facets of insurance coverage. 

Credit: Science@NASA