An Insurance Perspective on U.S. Electric Grid Disruption Costs

Large yet infrequent disruptions of electrical power can impact tens of millions of people in a single event, triggering significant economic damages, portions of which are insured. Small and frequent events are also significant in the aggregate. This article explores the role that insurance claims data can play in better defining the broader economic impacts of grid disruptions in the United States context. We developed four case studies, using previously unpublished data for specific actual grid disruptions. The cases include the 1977 New York City blackout, the 2003 Northeast Blackout, multi-year national annual lightning-related electrical damage, and multi-year national line-disturbance events. Insured losses represent between 3% and 64% of total loss costs across the case studies.  The household sector emerges as a larger locus of costs than indicated in previous studies, and short-lived events emerge as important sources of loss costs.

The attached file is a post-print of an article accepted for publication in The Geneva Papers on Risk and Insurance – Issues and Practice, 41(4): 555-586; DOI: 10.1057/gpp.2016.9