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Be Smart about Insurance for the Smart Grid: Coverage for Losses from Cyber Events—Part I

Policyholder Informer

In this part of our two-part series, I identify the types and breadth of insurance claims that can result from a cyber breach or cyberattack on technologies deployed in the Smart Grid industry. These claims can affect a full range of entities and individuals, including electric utilities implementing Smart Grid technology, energy consumers, Smart Grid technology suppliers, and their individual officers and directors.

The Smart Grid: Costs and Benefits

The U.S. electric power grid is among the last major infrastructure systems to be computerized. At its beginnings, power generation was localized, designed simply to provide one-way interaction to deliver electricity to customers’ homes; electricity was not stored beyond its immediate needs. That model made it difficult for utilities to respond to increasing demand and to manage multiple sources of renewable and non-renewable energy. The “Smart Grid” is gradually introducing a multi-way dialogue whereby electricity and information can be exchanged between the utility and its customers. Because of its interactive capacity, the Smart Grid will allow for automatic rerouting when equipment fails or outages occur. The Smart Grid takes advantage of customer-owned power generators, weather predictions, and renewable energy sources to produce power when it is not available from utilities.

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This article was reprinted in the Judy Selby Consulting blog on September 27, 2017.