A Renewable Impulse
Every cynic that derides the promise of renewable energy should have a chat with the Swiss pilot, businessman and adventurer Andre Borschberg.
Borschberg, along with his partner and countryman Bertrand Piccard, successfully piloted the first solar plane to fly across the United States in the spring and early summer of 2013. And insurance was there to help make it happen.
Swiss Re Corporate Solutions provided hull insurance, aircraft liability and crew personal accident coverage for the Solar Impulse, a solar-powered plane conceived, engineered and built in Switzerland.
After shorter flights in Europe and North Africa, the entirely solar-powered plane and its pilots took on the adventure of flying from the west coast to the east coast of the United States in five stages.
The plane, which has two propellers and is self-powered on takeoff, left Mountain View, Calif., on May 3. After stops in Phoenix, Dallas, St. Louis, Cincinnati and Washington, D.C., Solar Impulse arrived in New York on July 6, completing its adventure across America.
The ultimate goal of the project, a primary premise of which is to realize the promise of renewable energy, is an around-the-world flight sometime in 2015.
The insured value of the plane is some $9.17 million, according to its Zurich-based insurer. The total value of the project to date is some $112 million.
HB-SIA, the prototype that is crossing the United States, was not built to fly around the world, but data collected from the flight will be used to construct HB-SIB, the prototype that will be built for the global voyage.
There was no small amount of pressure on Borschberg and Piccard as they took on this cross-country trip. Investments from as many as 80 companies went into the plane, which has a 208-foot-wide wingspan, and yet at 3,527 pounds, weighs only as much as the average car.
The lightness of the plane and its great width require a soft touch at the controls. The pilots must act with deliberation and under no circumstances can they overcorrect.
One of the beauties of recording modern adventures is that, in many cases, a journalist can communicate with the explorer in real time. So it was on June 13, that Risk & Insurance® through its relationship with Swiss Re, was given the opportunity to connect by telephone via satellite with Borschberg as he flew the Solar Impulse from St. Louis to Cincinnati.
“What is interesting about the plane is that you discover a whole new way of flying,” said Borschberg, who despite long hours at the controls of the single-passenger plane sounded relaxed and happy.
The plane is equipped with four brushless motors and is powered by more than 11,500 solar cells on its wingspan and horizontal stabilizer. It cruises at around 40 mph, which gives the pilots plenty of time for reflection.
“This is an airplane where duration is not a problem,” Borschberg said. “Of course, we fly at low speed but we can fly day and night; there are no limits,” he said.
“So time is not an issue anymore and you can enjoy what you do. We are not in a hurry. A day like today is truly an experience. It is a possibility to enjoy each moment and to be present in each moment,” he said.
As he flew on June 13, Borschberg enjoyed good flying conditions, with relatively clear skies and manageable winds. One of the purposes of the United States flight was to test the plane and its support team in different weather conditions.
Earlier, as the team prepared to fly to St. Louis, the convergence of an increasingly volatile climate driven by a warming planet collided with the ambitions of this Swiss project dedicated to the promise of renewable energy.
On May 31, the airplane hangar in St. Louis that had been tapped to serve as the temporary home of HB-SIA was damaged by a tornado. The Solar Impulse team adjusted, inflating a temporary hangar that stored the plane snugly.
“That was one of the goals of the flight here across America … to be exposed to different weather systems, different conditions, from the ones that we experienced in Europe and North Africa already, so that was part of the training,” Borschberg said.
The team behind this record-breaking flight is an impressive and well-qualified one. Borschberg served as a Swiss fighter pilot for more than 20 years. In addition, he earned a Master’s in Management Science from the Sloan School at
MIT and has been involved in numerous aviation start-ups.
Piccard, who comes from a family of scientists and adventurers, gained fame as the winner of the Chrysler Challenge, the first transatlantic balloon race in 1992. He built on that feat by being the first person to pilot a balloon around the world in 1999. Piccard, chairman of the Solar Impulse project, began thinking about a solar-powered plane in 2003, but he needed a lot of help to see his dream realized.
Major corporate partners on the project are Frankfurt, Germany-based Deutsche Bank, the Belgian chemical company Solvay S.A., Swiss watchmaker Omega S.A. and the Swiss elevator maker Schindler.
Additional corporate partners include Swiss Re, Bayer, Swisscom and Altran, but there are more than 80 companies associated with the project. That’s in addition to a team of scientists and engineers based at the École Polytechnique Fédérale de Lausanne in Switzerland.
Apart from the tornado that trounced the hangar in St. Louis, the trip across the United States was an unqualified success.
“Touch wood, cross my fingers but the airplane is doing great,” Borschberg said.
“The solar technology is something which is fully reliable. You cannot wear this out … it lasts,” he said.
“Electric motors also have few moving parts, so that is a big, big advantage. They function at low temperatures, so you don’t have the thermal shock that you have with other technologies.”
In its brief life, Solar Impulse already possesses several aeronautical records for a solar plane, including an absolute height of 30,300 feet and duration of flight at 26 hours, 10 minutes and 19 seconds.
Both Borschberg and Piccard are well-seasoned pilots, which is an advantage because the physical demands of flying Solar Impulse are considerable.
The plane can only carry one person, so there is no one to relieve the pilot, even as he stays at the controls for 24 hours or more at a time.
For Borschberg, the sheer joy, not only of flying itself but of being a pilot on this particular project are more than enough to carry him along.
“Of course Bertrand and myself, we are really passionate about the work we are doing. We are passionate about flying and when you truly like what you are doing, you have a different kind of energy,” he said.
“Second, we are carried by the potential of this airplane and also by the ideal that is around that,” he said.
“I think the other part, of course, is that flying is a wonderful way to look at the earth and see the beauty of it. And so when you fly, you are captivated by that.
“It can be by day, it can be by night. It can be at sunset, it can be at sunrise, so all of this makes the trip truly memorable.”
Raining Down Destruction
When the asteroid strikes earth’s atmosphere, it is traveling at approximately 56,000 mph. At 50 meters to 60 meters wide, it is not large enough to wipe out humanity or irrevocably alter the tilt of the Earth’s axis or its orbit. But it’s going to do plenty of damage, particularly because of where it is headed: right at New York City. The asteroid, made of rock not too dissimilar from the rocks found on Earth, begins to break up nearly 200,000 feet in the atmosphere. About three miles up, or 18,800 feet, the projectile bursts into a cloud of fragments.
When it does that, it releases the power of 1,000 A-bombs — 10 megatons of TNT.
On the ground, the sound of the explosion reaches 105 decibels, enough to cause people to cover their ears in pain. That is, if the explosion’s incendiary heat and blast wave with its 500 mph winds don’t reach them first.
For residents of the metro area about 25 miles from the detonation site, the fireball looks like a second sun in the sky. The pressure from the explosion reaches them with 70 mph winds, though, wreaking havoc with homes and small business structures.
For about 19 miles surrounding the blast site, the fireball inflicts third-degree burns and ignites clothes.
Within 10 miles — reaching into the Bronx to the northeast, Brooklyn to the south and into Queens to the west — the blast wave reaches even higher pressure. That level of pressure is enough to generate wind speeds of a Cat-5 hurricane, strong enough to raze or severely damage factories, offices and residences.
The air is filled with glass, bricks and jagged concrete, and those half of the Outer Borough residents who do not die are surely injured.
For those within 2.5 miles of the blast, the news is worse. About 17.6 seconds after the explosion, come those 500+ mph winds — arriving faster than the speed of sound. The effects of this phenomenon are not for the faint of heart to consider, but take the worst tornado stories imaginable, multiply by two, and overlay them across almost all of Manhattan.
The force tears already scorched flesh off bones and limbs from bodies. Windows and walls of buildings implode. Multistory, reinforced concrete buildings collapse. Nothing is left of wood frame buildings. Highway truss bridges collapse. Nearly every tree in Central Park is leveled. And what falls down become missiles that kill and maim.
Perhaps luckiest are those closest to ground zero. Within the first second of the detonation, the heat energy within a mile turns flesh into steam, clean to the bone. Assume near total demolition at ground zero with fatalities as good as 100 percent.
Research for creating this description included information from the Earth Impacts Effect Program sponsored by the Imperial College London and Purdue University, It also used research provided by the Nuclear Weapon Archive. In its scale and effects, an asteroid impact would be similar to a fusion bomb.
But the most relevant source for the above scenario was a research report published in 2009 by RMS, the catastrophe modeling solutions provider.
The RMS report explored a 1908 event, the Tunguska asteroid impact in Russia at its 100th anniversary. In that strike, a mid-size asteroid (about 50 meters in diameter) exploded 3 to 5 miles above the Siberian forest. It leveled trees across 770 miles, and the pressure waves generated were measurable around the world.
Eyewitnesses were few and far between, but the few recorded for history including one person who experienced the event from 40 miles out and said, “at that moment, I became so hot that I couldn’t bear it, as if my shirt was on fire.”
The modeler asked: What if this occurred above New York City?
To calculate the probable maximum loss, RMS placed the proposed Tunguska damage footprint over Manhattan. It assumed a mean damage ratio, fatality rate and injury rate within the inner footprint of destruction to be 70 percent, 50 percent and 40 percent, respectively. In the outer footprint, they were 30 percent, 2 percent and 35 percent, respectively.
Then, RMS populated its map of Manhattan with datasets for population concentrations and insured assets. As much as $760 billion in property exposure and 3.61 million people exist within the outer swath of destruction, and with the inner ring of fire and death, $1.38 trillion and 6.25 million people.
According to RMS calculations, that translated to property losses of $1.19 trillion, 3.2 million deaths and 3.76 million injuries.
Such a biblical tally — and indeed, an asteroid impact may have caused the flood behind Noah’s ark — leads us to a question: Would property insurance companies even have to pay such a massive bill?
When a meteor exploded over Chelyabinsk, Russia, on Feb. 15, 2013, this question was raised. Michael Barry, vice president for media relations at the Insurance Information Institute, was quoted in Time.com as saying, at least with homeowners policies, “it’s got to be a direct hit” to trigger coverage. If an asteroid were to explode miles in the air and level everything below it, “the coverage is going to be open to interpretation.”
RMS conceded in its report that “it is unclear if, on any current contractual grounds, insurers would exclude damage caused by such a peril.”
Yet, the consensus appears to be that comprehensive commercial multiperil and all-risk policies ought to cover damage from an asteroid blast, unless specifically excluded.
“Generally, losses from the impact of meteorites or asteroids are covered in standard insurance policies. However, differences do exist from country to country,” was the simple statement put out by Munich Re after Chelyabinsk.
In Earth’s history, larger strikes have happened. The dinosaurs were made extinct by an asteroid that could be measures in kilometers, not meters.
If that were the case, “it’s a whole new world the next day,” said Lou Gritzo, vice president of research at insurer FM Global. It’s literally a whole new world.
That sort of impact would extend beyond the affected region and country, and have geopolitical security implications. Countries might cease to exist, let alone insurance companies.
A Tunguska-sized space rock could have ripple effects beyond the New York region, given the “brittle” economic situation in today’s over-connected financial and business worlds, Gritzo said. The word he used to describe such a threat is “reset” — to geopolitical and economic systems, but also to the well-being and daily lives of people on the East Coast and the insurance industry.
After a significant event like this, the insurance industry would be “really in ‘only the strong survive’ mode,” Gritzo said.
We can’t define “the strong” as those specifically prepared for an asteroid strike. As Robert Muir-Wood, chief research officer at RMS, explained, no one on the insurance side has a strategy to handle such an event at the moment.
Nor should they. It’s not practical to chase every Black Swan that flies under the sun.
If you’re running an insurance or reinsurance company, said Muir-Wood, you have to decide what is the risk threshold that you’re worried about and manage to that risk, so you will survive.
“Generally,” said Hélène Galy, head of proprietary modeling, managing director, Global Analytics, at Willis and the Willis Research Network, “when we provide catastrophe modeling results to clients, for example for a flood model, they are more interested in the low return periods, which should match their recent loss experience. Typical return periods are 100 year and 250 year.”
Gritzo at FM Global said that company underwrites to the 500-year risk level and advises its clients to protect their own properties to that 0.2 percent annual probability.
The odds of a Tunguska-like event striking a major urban area — let alone the major urban area in the United States — are very high.
The frequency of rocks this size hitting Earth in any one place, however, could fit within this 500-year window. According to the Asteroid Terrestrial-impact Last Alert System (ATLAS) at the Institute for Astronomy at the University of Hawaii — its purpose: to identify these rocks before they hit — “city killer” sized asteroids arrive once every few hundred years.
Given that location uncertainty but surety of occurrence, standard rules of catastrophe management apply for reinsurers and insurers. Prepare for the disaster that really scares you, and likely you will be relatively prepared when another disaster strikes.
One such rule of the “only the strong shall survive” school of thinking is diversity — away from insurance lines like property and away from concentrations of underwriting in any particular urban area or region.
“In this extreme scenario, losses would be so regional and total that a number of regional insurers would probably disappear. Reinsurers with enough diversification should survive,” said Galy.
She added, “insured losses would be dwarfed by economic losses, so it is the economy and civil society that would be most impacted.”
It would be a “reset” unlike anything we have seen.
“It would look a bit of a mess,” said Muir-Wood. The nearest historical equivalent would be the Tokyo earthquake in 1923, when the city burned and total insured losses were beyond insurance coverage.
The government then allowed insurers to pay back as much as they could without going under. In that way, it could be comparable to another recent Black Swan — the 2007-2008 financial crisis.
As long as it is still standing, the U.S. government would not sit by and let all the big insurance companies disappear, like the dinosaurs did.
Six Best Practices For Effective WC Management
It’s no secret that the professionals responsible for managing workers compensation programs need to be constantly vigilant.
Rising health care costs, complex state regulation, opioid-based prescription drug use and other scary trends tend to keep workers comp managers awake at night.
“Risk managers can never be comfortable because it’s the nature of the beast,” said Debbie Michel, president of Helmsman Management Services LLC, a third-party claims administrator (and a subsidiary of Liberty Mutual Insurance). “To manage comp requires a laser-like, constant focus on following best practices across the continuum.”
Michel pointed to two notable industry trends — rises in loss severity and overall medical spending — that will combine to drive comp costs higher. For example, loss severity is predicted to increase in 2014-2015, mainly due to those rising medical costs.
Debbie discusses the top workers’ comp challenge facing buyers and brokers.
The nation’s annual medical spending, for its part, is expected to grow 6.1 percent in 2014 and 6.2 percent on average from 2015 through 2022, according to the Federal Government’s Centers for Medicare and Medicaid Services. This increase is expected to be driven partially by increased medical services demand among the nation’s aging population – many of whom are baby boomers who have remained in the workplace longer.
Other emerging trends also can have a potential negative impact on comp costs. For example, the recent classification of obesity as a disease (and the corresponding rise of obesity in the U.S.) may increase both workers comp claim frequency and severity.
“The true goal here is to think about injured employees. Everyone needs to focus on helping them get well, back to work and functioning at their best. At the same time, following a best practices approach can reduce overall comp costs, and help risk managers get a much better night’s sleep.”
– Debbie Michel, President, Helmsman Management Services LLC (a subsidiary of Liberty Mutual)
“These are just some factors affecting the workers compensation loss dollar,” she added. “Risk managers, working with their TPAs and carriers, must focus on constant improvement. The good news is there are proven best practices to make it happen.”
Michel outlined some of those best practices risk managers can take to ensure they get the most value from their workers comp spending and help their employees receive the best possible medical outcomes:
1. Workplace Partnering
Risk managers should look to partner with workplace wellness/health programs. While typically managed by different departments, there is an obvious need for risk management and health and wellness programs to be aligned in understanding workforce demographics, health patterns and other claim red flags. These are the factors that often drive claims or impede recovery.
“A workforce might have a higher percentage of smokers or diabetics than the norm, something you can learn from health and wellness programs. Comp managers can collaborate with health and wellness programs to help mitigate the potential impact,” Michel said, adding that there needs to be a direct line between the workers compensation goals and overall employee health and wellness goals.
Debbie discusses the second biggest challenge facing buyers and brokers.
2. Financing Alternatives
Risk managers must constantly re-evaluate how they finance workers compensation insurance programs. For example, there could be an opportunity to reduce costs by moving to higher retention or deductible levels, or creating a captive. Taking on a larger financial, more direct stake in a workers comp program can drive positive changes in safety and related areas.
“We saw this trend grow in 2012-2013 during comp rate increases,” Michel said. “When you have something to lose, you naturally are more focused on safety and other pre-loss issues.”
3. TPA Training, Tenure and Resources
Businesses need to look for a tailored relationship with their TPA or carrier, where they work together to identify and build positive, strategic workers compensation programs. Also, they must exercise due diligence when choosing a TPA by taking a hard look at its training, experience and tools, which ultimately drive program performance.
For instance, Michel said, does the TPA hold regular monthly or quarterly meetings with clients and brokers to gauge progress or address issues? Or, does the TPA help create specific initiatives in a quest to take the workers compensation program to a higher level?
4. Analytics to Drive Positive Outcomes, Lower Loss Costs
Michel explained that best practices for an effective comp claims management process involve taking advantage of today’s powerful analytics tools, especially sophisticated predictive modeling. When woven into an overall claims management strategy, analytics can pinpoint where to focus resources on a high-cost claim, or they can capture the best data to be used for future safety and accident prevention efforts.
“Big data and advanced analytics drive a better understanding of the claims process to bring down the total cost of risk,” Michel added.
5. Provider Network Reach, Collaboration
Risk managers must pay close attention to provider networks and specifically work with outcome-based networks – in those states that allow employers to direct the care of injured workers. Such providers understand workers compensation and how to achieve optimal outcomes.
Risk managers should also understand if and how the TPA interacts with treating physicians. For example, Helmsman offers a peer-to-peer process with its 10 regional medical directors (one in each claims office). While the medical directors work closely with claims case professionals, they also interact directly, “peer-to-peer,” with treatment providers to create effective care paths or considerations.
“We have seen a lot of value here for our clients,” Michel said. “It’s a true differentiator.”
6. Strategic Outlook
Most of all, Michel said, it’s important for risk managers, brokers and TPAs to think strategically – from pre-loss and prevention to a claims process that delivers the best possible outcome for injured workers.
Debbie explains the value of working with Helmsman Management Services.
Helmsman, which provides claims management, managed care and risk control solutions for businesses with 50 employees or more, offers clients what it calls the Account Management Stewardship Program. The program coordinates the “right” resources within an organization and brings together all critical players – risk manager, safety and claims professionals, broker, account manager, etc. The program also frequently utilizes subject matter experts (pharma, networks, nurses, etc.) to help increase knowledge levels for risk and safety managers.
“The true goal here is to think about injured employees,” Michel said. “Everyone needs to focus on helping them get well, back to work and functioning at their best.
“At the same time, following a best practices approach can reduce overall comp costs, and help risk managers get a much better night’s sleep,” she said.
To learn more about how a third-party administrator like Helmsman Management Services LLC (a subsidiary of Liberty Mutual) can help manage your workers compensation costs, contact your broker.
Debbie discusses how Helmsman drives outcomes for risk managers.
Debbie explains how to manage medical outcomes.
Debbie discusses considerations when selecting a TPA.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Helmsman Management Services. The editorial staff of Risk & Insurance had no role in its preparation.