Commentary | Chelyabinsk: An Insurance Perspective
On Feb. 15, 2013, a meteor with an estimated diameter of 20 meters and an estimated mass of 12,000 to 13,000 metric tons entered Earth’s atmosphere and exploded high over Russia’s Ural region, injuring hundreds of people and causing millions of dollars’ worth of property damage. Meteors pose a hazard to people and property. It is timely to consider the hazard from an insurance point of view.
Earth has experienced meteorite bombardment throughout its 4.5 billion-year history, including the event some 66 million years ago that is believed to have contributed to the extinction of the dinosaurs. Earth’s geological processes have effaced most of the scars of this bombardment. However, a glance at the craters of the Moon shows what sorts of impacts Earth too must have endured. Most of this bombardment occurred early in the planet’s history. However, there are still bodies of all sizes orbiting the sun in highly elliptical orbits that cross Earth’s orbit and thus can potentially collide with Earth.
An event like the one of 66 million years ago is vanishingly unlikely within the geologically short time horizon that society can plan for. Moreover, such an event would be beyond insurance considerations. But the potential for significant lesser events is real, as the Chelyabinsk event demonstrated.
What are the implications of such events for the insurance industry? Can or should this risk be addressed through insurance, and if so, how?
Various terms are used to describe bodies from space that may enter Earth’s atmosphere. Asteroids are inactive rocky bodies, smaller than planets, which orbit the sun. Comets are also relatively small bodies composed of ice, rock and dust that travel about the sun in highly elliptical orbits. Meteoroids are small particles that break apart from comets or asteroids. Meteors, commonly known as “shooting stars,” are meteoroids that enter Earth’s atmosphere and are partly or completely vaporized in the extreme heat generated by their high-velocity paths through the atmosphere. Meteorites are meteoroids that actually land on Earth’s surface.
Every day our planet is bombarded by approximately 100 tons of meteoritic material. Most of this material is in the form of small particles that are substantially vaporized in the atmosphere. When some small solid pieces reach the ground they are usually unnoticed and unfound. On rare occasions larger meteors, like the one above Chelyabinsk, do survive passage through the upper atmosphere, and either reach the surface of Earth or explode in the lower atmosphere. Many small pieces of the Chelyabinsk meteor have been found.
The June 30, 1908, Tunguska event is the largest known meteor incident in historical times. What has since been identified as a meteor or comet flattened more than 2,000 square kilometers of forest in a remote area of Siberia. The force of the explosion has been variously estimated in the range of 5 to 50 megatons of TNT equivalent. Like the Chelyabinsk meteor, the Tunguska meteor exploded in the atmosphere before impact, creating an air burst estimated to have occurred 5 to 10 kilometers above Earth’s surface.
In a contrasting case, on Sept. 29, 1938, in Benld, Ill., a small stony-iron meteorite with a mass of about 1.8 kilograms penetrated in turn the roofs of a garage and of the car parked inside it. The meteorite was found caught in the springs of the seat cushion of the parked vehicle. Neither the car nor the garage was destroyed or even very seriously damaged.
The energy released in the Tunguska explosion was comparable to those of the atmospheric hydrogen bomb tests conducted by the United States and the Soviet Union in the 1950s, while the smaller Chelyabinsk explosion released energy estimated at about 500 kilotons, considerably more than that released by the fission weapons exploded over Hiroshima and Nagasaki. Had the Tunguska event occurred in a densely populated area, the result would have been disastrous.
The Chelyabinsk meteor exploded at an altitude of 27 kilometers. This may be compared with the explosion height of the much less powerful Hiroshima air burst, which was less than 1 kilometer. This contrast between Chelyabinsk and Hiroshima in the height of the air burst highlights the importance of the altitude of explosion as a factor in the extent of the damage caused.
The potential damage, from society’s point of view, resulting from large meteorite events — as with other natural hazards, and as with nuclear explosions — is highly dependent on the proximity of the event, both horizontally and vertically, to a populated area.
One can gain a sense of the probability of such events by noting that the time spanned by the Tunguska and Chelyabinsk events is roughly a century. Thus, one may think of this kind of event as occurring roughly “once in a lifetime.” Readers of SpaceNews know that even before Chelyabinsk there has been much recent interest in and concern about near-Earth objects. Chelyabinsk has renewed and intensified the scientific debate on just what the frequency statistics really are for significant meteorite events. In any case, compared to earthquakes or hurricane landfalls, these are very rare events.
Damage and injuries from the Chelyabinsk event are authoritatively summarized in a paper published in the Nov. 29, 2013, issue of the journal Science. With regard to the local insurance implications of the Chelyabinsk event, much can be learned from the Russian press. According to local media, many Russian insurance companies declined coverage for claims submitted. The vast majority of insurance claims made were property damage claims for broken glass, windows and damaged roofs. Not surprisingly, not a single insurance company had included in their standard residential policies any language pertaining to meteor damage or risk. Some insurers are reported to have elected to pay claims submitted under “explosion” coverage. From press reports, it does not appear that very many of the claims for bodily injuries that were filed asserted that the meteor was a direct cause, although there were many cases of sunburn and eye injury from direct exposure to the fireball in the sky. Individuals who sustained injuries in the blast for the most part filed claims under the general category of “accident.”
Not all policies were as oblivious to meteor risk as the residential policies. Some of the larger Russian auto insurers did in fact include coverage for meteorite damage in their policies. Also, in Russia, it has been common for large industrial companies to pay substantial premiums for insuring property against exotic risks, including meteorites, in order to be eligible for certain tax benefits. With the Chelyabinsk meteor event, both surprised insurers and surprised insureds have found themselves in an unexpected situation as the insureds may demand payment on claims against meteorite risks.
A typical U.S. homeowner’s policy covers the dwelling, other structures, personal property and loss of use, personal liability, medical payments to others, repairs, debris removal, trees, shrubs and plants, collapse, breakage of glass, etc. Coverage for personal property often includes coverage specifically for loss resulting from fire or lightning, windstorm or hail, or explosion. “Falling objects” is often included as a covered cause of loss.
A homeowner’s policy may or may not provide coverage for property damage sustained due to an “act of God.” Traditional act of God events include tornadoes, earthquakes, violent winds and extraordinarily high tides. In the past, homeowner’s policies for property damage have tended specifically to exclude coverage for damage caused by act of God events. However, in recent years, there has been a trend toward removing the exclusion for act of God, usually in lieu of specific exclusions for items such as flood or earthquake.
Similarly, most commercial property policies cover direct physical loss of or damage to covered property — both buildings and business property such as furniture, fixtures, machinery and equipment — and coverage for debris removal, preservation of property, and pollution cleanup. Fire, lightning and explosion are again generally included in covered causes of loss. A typical commercial property policy also includes coverage for lost “business income” and sometimes for “contingent business interruption.” The latter is coverage to protect an insured against an interruption in the supply chain due to disruption of a key supplier.
The problem that meteors pose for insurers is that because of their rarity and the vast range of possible damage effects, it is not practical to write insurance specifically for meteor damage in a quantitatively well-informed way. With the policy language that is generally now in use, if and when a meteor event occurs, insurers and insureds are likely to dispute whether meteor damage and injury are covered or excluded under current policy language that typically does not specifically address it.
To avoid extensive litigation, insurers may wish to consider adding language to their policies to specifically address a problem that is unlikely to occur but could be very contentious and expensive if it does. Similarly, reinsurers should probably write their agreements and risks in such a way as to limit their aggregate liabilities with respect to this type of event.
In short, clarity is the available tool.
Michael J. Frimet and Silje M. Roalsvik are attorneys at the law firm Stalker, Vogrin, Bracken and Frimet LLP of Blue Bell, Pa. Richard P. Cember is a scientist at Computational Physics Inc. of Springfield, Va. John Correira and Abigail T. Cember of Computational Physics also contributed to this article.