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Perhaps we can forgive the insurance industry for at times going too far in thinking of new products to cover risks in the property/casualty sector. After all, how else does an industry survive if not, in part, for its ability to sell new products and reinvent itself with the changing demands of the marketplace?

But here are some cases where the risks are downright bizarre, so outlandish, in fact, that perhaps we'd all be better off if they were overlooked entirely. Better and cheaper for underwriters to lay these scenarios off on Hollywood, and then sell the studios some liability coverage in case something does go wrong on the set of Armageddon 5.

As part of this special report on overlooked risks, we asked underwriters, brokers and consultants to submit what they believed were among the most overlooked risks. The most plausible and compelling appear on the preceding pages of this special report. But we decided to publish some of the more original entries from the far side of the imagination.

Let there be no doubt that inside the cloister of cubicles that serve as the offices of the foot soldiers of the industry bubbles a fervent imagination. May all those who've accused insurance executives of lacking imagination forever hold their tongues, yet at the same time pray that none of these risks ever come to pass.

Oddball risks, in no particular order, include:

SOLAR FLARES

When the sun gets hot and bothered the mighty planet acts up, and that means anything with a pulse, an electromagnetic pulse that is, is going to have a bad day. The flares, if nasty enough, can fry the circuits of electrical appliances or just about any object that runs on electricity. Here on planet earth, unless you're a toaster, our atmosphere and magnetic fields protect us from these explosions, so there's not much to worry about. But if we lived on the moon, which has no atmosphere, the storm of protons unleashed by the flare would give any astronaut radiation sickness, even if his or her health insurance included solar-flare coverage.

FALLING SPACE OBJECTS

Objects falling from space have to be large enough to survive the intense head of atmospheric entry. Hardware--parts of a space shuttle or space station, for example-- has made it to earth. Some astronomers have likened the amount of space debris circling the globe to traffic on the New Jersey Turnpike. But, let's face it, when's the last time anyone's been killed by falling space debris? The only oddballs in space seem to be former NASA astronauts like Lisa M. Nowak, who was charged earlier this year with attempted murder stemming from a bizarre love triangle.

THE MEGATSUNAMI

OK, this risk, which is destined to make the Dec. 26, 2004, waves that killed more than 250,000 people in countries ringing the Indian Ocean look tame by comparison, is for all you Discovery cable channel couch potatoes. "A tsunami wave hundreds of feet high, born of the collapse of a volcano in the Canary Islands off the coast of Morocco, could race across the Atlantic and reach speeds of 800 kilometers per hour," says Gary Koslov, assistant vice president, product management and development, for the PMA Insurance Group. "The wave would devastate a good portion of the East Coast. The human and economic losses would be unprecedented." You can almost hear him narrate the TV program. But who's to say it won't happen.

A brutal hurricane season tearing through the Southeast is bad enough. Add to that a huge earthquake (say, The Big One ripping into San Francisco) and a threat capable of overwhelming entire social systems (a pandemic, for example). Insured losses from three such catastrophes would cost well into the hundreds of billions of dollars, straining the entire insurance sector. Such triple-whammies are possible, theoretically, but highly, highly unlikely. Dwelling on just one of these misfortunes is enough and can ruin your whole day, thank you very much.

INTERNET MELTDOWN

Risk managers are connected to their underwriters and brokers by the vast electronic web called the Internet. Thousands of insurance and reinsurance policy transactions travel over the network daily. What if it were to completely shut down because of an electronic bubonic plague? Not likely. There are so many redundancies in the system with backup servers in safe rooms that only a small part of the network would be affected at any one time. Even during Sept. 11, 2001, many of the firms that lost data in the collapse of the World Trade Center were running again in a matter of days. The rest of the nation's Internet network was hardly affected.

MASSIVE LIGHTNING STRIKES

We're not talking about single bolts of lightning here but an all-out assault from the skies above, something akin to the celestial dogfights conducted by pilots of Lord Darth Vader in The Empire Strikes Back. How likely is that? Most unlikely, it turns out. According to the Journal of Climate published by the American Meteorological Society, the U.S. rate of lightning deaths was 0.42 per million people per year from 1959 to 1994. It sounds as if risk managers in search of cover from this risk have watched one too many installments of the Star Wars saga.

DEMOCRATS

The so-called party of ideas and inclusion was, up until January, an oddity in Washington, D.C., where Republicans have been running the nation for as long as anyone in today's attention-deficient culture can remember. But in the opinion of one respondent, now that the Democrats are in charge in Congress, they pose a risk, particularly to the hospitality and manufacturing industries. That's because the leaders in Congress tend to support labor unions more readily than Republicans. Democrats are also more likely to support increases in the minimum wage, which critics say acts as a drag on economic growth. Be that as it may, Democrats prowling around Capitol Hill are akin to "less output and greater losses," in the words of this respondent.

TITANIC IRONIES

A top company executive who jumps in to take command of a makeshift emergency response center raises the risk of slowing a recovery, according to Kathleen McGrorty, a director in independent risk consulting firm Protiviti's business continuity management practice. With a few exceptions, most C-suite executives don't posses the patience to execute and monitor a step-by-step recovery, she says. Ironically, many corporate titans have been known to actually get in the way during an emergency. So, if the CEO starts barking orders to risk and loss-control managers in the midst of an inferno, maybe it's time to look for a new employer--unless, of course, your corporate CEO is former New York City Mayor Rudolph Giuliani.

CYRIL TUOHY is managing editor of Risk & Insurance®.

May 1, 2007

Copyright 2007© LRP Publications