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Just more than 100 years ago, in rural Siberia, a comet or asteroid exploded with a force about 1,000 times more powerful than the nuclear bomb dropped over Hiroshima in 1945.
The fireball leveled about 80 million trees in a 770-square-mile area, and produced seismic waves felt all over the world. While no one was hurt -- it was an unpopulated area -- and no insurers suffered a loss, if an event of that magnitude were to happen today in a populated area, for example Manhattan, it could kill hundreds of thousands of people and cost more than $1 trillion in insured property loss, according to a report by Risk Management Solutions.
RMS studied the possible effects caused by a comet or asteroid explosion similar to the magnitude experienced over the Tunguska River in central Siberia in 1908. While the probability of a catastrophe such as this is extremely low, RMS recommends insurers have a well-distributed portfolio rather than one concentrated in a single city to reduce the likelihood of ruin from such an extreme event.
"It's extremely unlikely, but it is credible that it could hit a city," said Robert Muir-Wood, chief research officer of RMS. He estimated that the Tunguska comet or asteroid, which broke up in the atmosphere above Siberia, would have been about 200 feet in diameter. "A collision with something of this size happens once every 100 to 200 years, but it's controversial. There are people who think it's more common than that, and some think it's less common than that."
Of course, smaller particles, called meteors and meteorites (when they hit the earth), are fairly common, and property insurance would cover any damage caused by them. In 2003, a meteorite shower fell over the Chicago suburb of Park Forest, Ill., causing minor damage to roofs, windows and car windshields, RMS noted.
An asteroid or comet the size of the Tunguska is much more rare, Muir-Wood said. By taking the footprint of the Tunguska event and superimposing it over Manhattan, RMS would expect to see about 3.2 million fatalities, 3.76 million injuries and property losses of $1.19 trillion.
"That's the worst case for any location in the United States," Muir-Wood said.
It's also not a likely event. The landmass of the United States is just 2% of the earth's surface, so if an asteroid like this happens once in every 100 years, it's only once in every 5,000 years that it would hit U.S. soil.
The United States has many unpopulated or sparsely populated areas. If you consider New York represents just 0.1% of the United States' land, then the risk would be once in every 5 million years you'd get a Tunguska-sized asteroid falling in Manhattan.
"We wouldn't expect insurers to contemplate this now. Insurers really aren't thinking of things this remote. Insurers typically focus on 1-in-100 or 1-in-200 year, or even 1-in-500 or 1-in-1,000 year events, but they would not be thinking of a 1-in-a million risk," Muir-Wood said.
However, insurers should be aware that even given the low probabilities of such an event, having a portfolio concentrated in a single city creates a great probability of financial ruin should an event of that magnitude occur, according to the report.
Hear the interview with Muir-Wood in an upcoming edition of BestDay Audio.
(By Meg Green, senior associate editor, BestWeek: Meg.Green@ambest.com)
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