European Insurers are reportedly adopting a “wait and see” attitude concerning potential claims from the blackout that hit the Northeastern U.S. and parts of Canada last week.
Both Reuters and Dow Jones Newswires featured analysis by company spokespersons indicating that they were waiting to receive more information on the power outage and its effects before making any assessments or statements on possible losses.
Most potential claims involve some form of business interruption, and policy terms vary widely as to the extent of the coverage and the type of losses covered. Many commercial policies don’t in fact cover power outages that are not directly related to the policyholders’ premises. The fact that no exact cause for the massive blackout has yet been established also exacerbates the companies’ task in evaluating claims.
So far speculation as to the cause has centered on a breakdown in the grid, either in Canada or the Northeastern U.S., which in turn caused the interconnected power stations to shut down as a protective measure. One commentator told the BBC that the power grid was so large, and so interdependent, that every power generating source from northeastern Canada, south to Virginia and west as far as the Rocky mountains was potentially affected.
A spokeswoman for Hannover Re told Dow Jones that the company didn’t expect large losses from the event, as most of its policies specify that power cuts must last between 12 and 24 hours before a loss event occurs. They also have high damage thresholds – 10 million euros ($11.3 million) for Hannover Re – which must be exceeded before triggering the policy. In addition companies must normally show that they suffered a specific economic loss as a direct result of the power outage in order to make a claim.
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