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Cyber attacks – power grid

Cyber Attacks – power grid

There is current concern regarding cyber attacks into the US power grid.

The Washington Post reported the following.   Russian hackers accessed the US power grid through a Vermont utility. The Vermont utility subsequently denied it. The utility  said that the attack was not linked to the grid. Furthermore, suspected hackers were not Russian. The media spread the story however.

The US power grid is sensitive.   Poor weather conditions do cause outages. However, there is serious concern.  It involves the potential hacking of the system. The utility’s control system is linked to the internet.

Businesses would  suffer heavy economic losses due to an outage

Therefore, businesses need to manage the potential business interruption risk. The only way to take care of this danger is by means of insurance.

Tripwire had an energy study in 2016 .  The study was conducted by Dimensional Research on cyber security challenges . These challenges face  organisations in the energy sector.

“It’s tempting to believe that this increase in attacks is horizontal across industries, but the data shows that energy organizations are experiencing a disproportionately large increase when compared to other industries. At the same time, energy organizations face unique challenges in protecting industrial control systems and SCADA assets.”

Tim Erlin, director of IT security and risk strategy for Tripwire.

Nearly 80% of respondents said that the amount of successful cyber attacks had increased in the previous 12 months.
However, almost 90% of the said respondents said they had not detected cyber attacks.

Electric generators could overload.  The immediate result would be fires and explosions.  Utility customers would lose billions. There was a 2014 analysis by the Federal Energy Regulatory Commission. They announced that successful attacks on just nine of the 55,000 US power grid substations could cause nationwide blackouts for weeks or even months.

Nepal Earthquake

The Nepal earthquake struck on 26 April 2015 caused about $2 billion in economic losses in the country.  Only a fraction of the cost will be incurred by insurers, according to Kinetic Analysis Corporation. Gorkha district was the epicenter of the 7.8 earthquake.

The Nepal earthquake triggered an avalanche on Mount Everest that killed 17 people,making it the deadliest day in the history of climbing on the world’s highest peak.

The rush of ice and snow swept through the base camp where climbers were preparing to ascend the mountain.

Damage in India could cost an additional $800 million.  This is according to figures from the disaster-modeling firm that include property damage and long-term business interruption costs. Less than 1 percent of the losses are covered by insurance. The estimates exclude costs for immediate needs such as food.

Chuck Watson from Kinetic said that most developing countries do not really have mature insurance industries. The magnitude 7.8 earthquake and aftershocks killed more than 4, 000 people. Million were displaced from their homes.

Nepal has a gross domestic product that is smaller than any of the 50 US states. Its 28 million people have the lowest spending power of any Asian country apart from Afghanistan.

Nepal’s insurers collected premiums of about $277 million in 2013.  Most of those funds were for life coverage. Spending on property-casualty coverage, such as auto and home insurance, is less than $4 per capita annually in Nepal. This is compared with almost $2,300 in the United States.

The costliness earthquake for the industry was in 2011.   More than 15,000 people were killed and insurers had losses of about $40 billion in Japan.

The Government’s Safe Travel website has upgraded the risk of travelling to Nepal to “high” and advised against all “tourist and other non-essential travel”.

Southern Cross Travel Insurance customers have been warned that those who choose to travel while the warning remains in place will not be covered against any claims incurred as a result of the earthquake.

The earthquake has led to a surge at websites offering policies to cover homes and their contents. Such policies are of two types. One covers the structure and construction costs. This is in the event of damage to the property due to natural calamities.  The other insures belongings and household contents.

A similar spike in demand was experienced during the Jammu and Kashmir floods, the Uttarakhand floods and the Sikkim earthquake.