The role of insurance in critical infrastructure resilience

Resilience enhances the traditional risk management toolkit in several aspects, and insurance is an effective risk transfer mechanism that can contribute to increasing resilience. However providing insurance to a CI based on its resilience level is a complicated matter. Resilience is for systems, whereas insurance policyholders are companies, not systems. Beyond the fact that insurance can strengthen resilience and the assumption that resilience can improve insurability, many of the ‘needs’ from insurance relating to resilience come back to understanding and calculating risk. The SmartResilience Horizon2020 project (2017-2019) considered the problem of how to assess the resilience of a CI and developed a series of indicators and methods for that purpose. Then it considered the problems currently faced by the insurance sector and explored whether such methods could reduce vulnerability to consequences of disruptions, and provide better insurance coverage.

This paper briefly presents some of the outcomes of the SmartResilience project, focusing on (1) the extent to which insurance can enhance resilience, (2) how resilience can improve the conditions of insurability of CI, and (3) how SmartResilience methods can be used for that purpose. There exists a positive feedback mechanism.

Source : EPFL

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