Disaster Risk Reduction Program
National Energy Technology Laboratory (NETL): Insurance Process and the Electric Utility Industry
United States Department of Energy (DoE)
George Mason University (GMU)
Duration: 2004-2005The project's goal is to create incentives for the electric utility industry to prevent industrial failures (blackouts or other loss-of-service). One way of accomplishing this goal is by leveraging the insurance industry, which uses market-based practices to entice superior risk management behavior. For example, insurance companies can lower premiums for those electric utility companies that deploy critical infrastructure practices, including consequence management programs. By requiring a utility to be responsible for more than just the loss-of-service, for example, but also for the people who are displaced by the loss, an electric utlity has a much greater incentive to prevent power loss. The insurance industry, and the use of risk transfer tools, may be one of the best ways to create this incentive, for it allows the market to work without heavy government intervention.
Virginia Tech's Disaster Risk Reduction Program will:
- Conduct an ongoing literature search during the study period to identify and assess (i) risk identification and (ii) risk transfer literature in the energy sector to develop a risk transfer library.
- Document literature search findings in format suitable for inclusion in library.
- Assist in convening of two (2) risk evaluation workshops through the following activities:
- Identify key industry groups and potential participants from insurance and electric power sectors;
- Prepare a list of candidate risk evaluation methodologies identified to date based on literature search.
- Provide support to GMU in preparation of summary workshop/conference white papers.
- Review and critique white papers
© 2006 Disaster Risk Reduction Program.