Power Blackout Risks

electricity producers and distributors
Producers usually buy property damage and business interruption insurance. These covers cushion or prevent 
financial loss due to a reduction in turnover, if such reduction is due to material damage to insured property
on the insured premises. Covered perils are fire, explosion, social perils and natural perils in fire business 
interruption insurance and various types of machinery failures in respect of machinery breakdown insurances. 
In general, distributors of electricity have the same options for business interruption coverage as producers. 
Since the distribution net with its transmission and distribution lines is usually heavily exposed to natural perils 
such as wind, ice storm and earthquake, insurance coverage may be limited regarding both property damage 
which triggers BI and insured perils. 
BI insurances for both producers and distributors usually avoids frequency losses by respective monetary 
deductions. These provide for self-insurance by the insureds in case of minor interruptions in electricity supply.
Some fairly new insurance products offer financial income protection against adverse weather conditions.
These normally apply to reduced electricity consumption arising in connection with warmer than expected winter 
seasons, i.e. do not depend on accidental loss events. Often such covers are determined by indexes – so-called 
parametric covers – rather than by the actual loss sustained as is the rule in Property and Casualty insurance.
In addition, special BI extensions exist which cover financial loss in connection with failure to produce or deliver 
electricity following malfunction of data that was not caused by a physical loss or damage. Insured perils include, 
data corruption or malfunction of data due to operating errors, hacker attacks or data malware. 
consumers
Consumers range from industrial and commercial enterprises to public authorities. Industrial and commercial 
enterprises buy insurance against both material damage and BI due to failure of electricity. Usually for both types 
of covers material damage on the premises of the insured is required. Such coverage only exceptionally includes 
the transmission and distribution lines as the accumulation potential is considered to be high. In case the feared 
event does not occur at the insured’s location but at a supplier’s site, this type of BI extension is called dependent 
BI or contingent BI. 

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