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New tool helps risk managers prepare for blackouts and other perils


Blackouts can leave even the most conscientious risk managers in the dark. With this problem in mind, The Hartford Steam Boiler Inspection & Insurance Co., a unit of Munich Reinsurance Co., and Atmospheric & Environmental Research, a unit of Verisk Analytics Inc., are partnering to provide a new service that will help risk managers prepare for blackouts.

The service, which is in a final testing phase and soon will be offered by both firms, uses data from both to calculate the financial consequences of power outages and assess potential losses from multiple perils.

HSB President and CEO Greg Barats said the offering is the result of an internal project started in 2003 to calculate the cost of power outages.

“We have refined this model over an extended period of time through our data and our losses,” Mr. Barats said.

Mr. Barats said partnering with the Verisk research arm was the best way to commercialize the product.

“AER brings in a significant amount of technical modeling capability, including a state-of-the-art weather simulation model,” he said.

AER President and CEO Ron Isaacs agreed that the alliance makes sense and will give users a better sense of how the intersection of weather events and an aging power grid threaten the power infrastructure on which businesses depend.

“HSB has very deep knowledge associated with electrical infrastructure equipment,” Mr. Isaacs said. “They bring to the table a profound understanding of the parametric issues associated with power generation, distribution and transportation equipment. AER has a complementary, profound understanding of the phenomenology associated with the environment, in particular weather.”

For example, using AER's historical data has allowed creation of simulations and scenarios to show risk managers how a given event would affect the power infrastructure on which they rely.

“We think this model would be able to run a wide range of scenarios from weather to human- and equipment-caused failures,” Mr. Barats said. “This is a unique opportunity to bring in a probabilistic tool to estimate losses.”