Black Swan

Toxic Tornado

When a nuclear reactor melts down due to a powerful tornado, deadly contamination rains down on a metropolitan area.
By: | August 4, 2014 • 9 min read

It is a warm, humid spring day in Dallas/Fort Worth when strong thunderstorms begin to develop alongside a high-altitude weather system that includes strong winds and convective energy coming from the Rocky Mountains.

By mid-afternoon, the atmosphere reaches a tipping point. A massive supercell thunderstorm along the weather front produces large, damaging hail and what is later designated as an EF5 tornado, with winds in excess of 200 mph.

The most recent tornado of this size as designated by the National Weather Service was on May 20, 2013, when an EF5 struck Moore, Okla., killing 24 people, flattening neighborhoods and schools, and injuring more than 350 people.

This Texas tornado is much, much worse.

Video: An EF5 tornado in May 2013 flattened much of Moore, Okla.

Moving in the usual southwest to northeast direction, it creates a damage path about 1 mile wide and nearly 200 miles long, and directly strikes the Comanche Peak Nuclear Power Plant in Glen Rose, Texas, about 40 miles west of Fort Worth and 60 miles west of Dallas.

The power plant’s reactor was built to withstand winds up to 300 mph, but it can’t withstand what happens after the tornado throws around multiple gas-filled tanker trucks, which explode and kill numerous workers.

Matthew Nielsen, director of Americas product management at RMS, created the model for our Comanche Peak Nuclear Power Plant black swan scenario.

Matthew Nielsen, director of Americas product management at RMS, created the model for our Comanche Peak Nuclear Power Plant black swan scenario.

Debris fills the air as the powerful winds destroy much of the plant’s emergency equipment, making it impossible to maintain proper conditions and temperature within the reactor. The remaining power plant workers feverishly try to manually shut down the nuclear reactor before it melts down. They can’t.

When the reactor’s heat exceeds the ability of the plant’s processes to cool it down, radioactive gases begin to snake their way into the funnel stacks. The radioactive contamination is carried by the ferocious winds directly toward Dallas/Fort Worth.

Communication fails as area power lines go down, so it is difficult to warn the 7 million residents of the Metroplex, as Dallas/Fort Worth is known. Residents know the tornado has been sighted and try to prepare, but they don’t know that deadly airborne toxins are being carried toward them.

The Damage

About 10,000 homes and 700 commercial structures in the direct path of the tornado are completely destroyed and another 35,000 suffer damage, according to a model built by RMS. Roofs are ripped off apartment houses and multi-family dwellings. Vehicles are tossed around like toys, and with the storm striking at rush hour, workers on the roads are exposed to flying debris and high winds.


Even with residents sheltering in basements and safe rooms, fatalities reach into the 500-700 range — putting this event in line to be the deadliest tornado in U.S. history, after the Tri-State tornado of 1925, which killed 695 people in Missouri, Illinois and Indiana.

But it is the unseen radioactive contamination that ultimately makes the deadliest mark on the area.

Immediate fatalities from radiation poisoning number about two dozen, but as the contaminated rainfall seeps into the ground soil and water supply, the long-term health of the residents — and their descendants — is jeopardized. So, too, are the cattle and other agricultural products of Texas, which leads the nation in the number of ranches and farms it holds.

Chernobyl and Fukushima are the only events of a similar nature, even though the United States has seen its own recent near misses.

The radioactivity causes large swaths of area to be cordoned off, making it difficult to repair transmission and power lines as well as homes and businesses.

“The hard truth is that many businesses will close and many people will move from the area,” said Todd Macumber, president of international risk services, Hub International.

Chernobyl and Fukushima are the only events of a similar nature, even though the United States has seen its own recent near misses.

In 2011, a tornado knocked out power to the Browns Ferry Nuclear Power Plant near Huntsville, Ala., requiring the shut down of its three reactors. The plant fired up backup diesel generators until power was restored. The storm also disabled the plant’s sirens, which are needed to warn nearby residents in a crisis.

That same year, a tornado barely missed damaging 2.5 million pounds of radioactive waste at the Surrey Power Station in southeastern Virginia, although it touched down in the plant’s electrical switchyard and disabled power to the cooling pumps. The operators needed to activate backup diesel generators to run the two reactors until power was restored.

Twenty-eight years after the radioactive disaster at Chernobyl in 1986, some parts of the Ukraine remain a toxic wasteland. And in Japan, an initial evacuation area of about 2 miles surrounding the Fukushima Daiichi Nuclear Power Plant was soon widened to about 12.5 miles.

About 300 tons of  highly radioactive water has leaked from storage tanks at the Fukushima Daiichi Nuclear Power Station.

About 300 tons of highly radioactive water has leaked from storage tanks at the Fukushima Daiichi Nuclear Power Station.

Now, three years after three of Fukushima’s six reactors melted down, the area is still unlivable and 40 miles away, diagnoses in children of thyroid cancer, which is caused by radiation poisoning, are skyrocketing, according to some reports.

Nearly 16,000 people died in the 2011 earthquake and tsunami that struck Japan, causing the meltdown. About 160,000 people were evacuated, 130,000 buildings were destroyed and $210 billion in damage was sustained.

The Texas scenario has a lot of variables, said Matthew Nielsen, director of Americas product management at RMS, who created the model for our Comanche Peak Nuclear Power Plant black swan scenario.

The likelihood of a tornado, with thunderstorms and hail, causing massive structural damage is about 1 in 200 years, he said. Such an event would result in at least $20 billion in insured losses and uninsured losses of about the same amount.

But a tornado following the exact path as this scenario — striking the power plant and heading into the Dallas/Fort Worth Metroplex — has a much, much smaller chance — about 1 in 10,000 years.

“Given the fact that tornadoes are very rare, it isn’t something that I think people should be screaming and running around frantically about,” Nielsen said. “But it’s certainly something that could happen.”

As for losses due to the radiation? “There’s not a lot of historical data points that we can confidently say that that portion would be x or y billion,” he said.

The Recovery

Any rebuilding will be delayed by the threat posed by radioactive contamination, which may spread over a large area via the thunderstorms and storm water runoff.

From an insurance perspective, all personal and commercial lines of insurance have a nuclear energy hazard exclusion. American Nuclear Insurers (ANI) provides third-party liability insurance for all power reactors in the United States.

“We are responsible for the insurance coverage protecting the operators from claims alleging bodily injury or property damage offsite from [radioactive] materials,” said Michael Cass, vice president and general counsel at ANI, a joint underwriting association with 20 insurance company members.

082014_02_cs_tornado_nuclear350pxNEWThe ANI was created under the Price-Anderson Act of 1957 and provides a primary policy limit of $375 million for claims due to offsite consequences from the release of radioactive materials from the 100 operating nuclear power plants in the United States. It also covers some plants that are shut down or in the process of being decommissioned, he said.

The ANI also covers costs related to emergency response and evacuation, including food, clothing and shelter, he said.

The joint underwriting association also administers an additional excess layer of about $13.2 billion, the costs of which would be borne by the power plant operators, and would be apportioned equally among them.

For any claims above $13.6 billion (which includes both the primary and excess layers), the Price-Anderson Act requires the U.S. Congress to “take steps to come up with a scheme to provide full compensation to the public and to continue claims payments,” Cass said.

“They could assess or tax the energy industry in some fashion or form. It doesn’t say that specifically, but that is what is alluded to.”

None of the insurance companies that are ANI members would be adversely affected if such a black swan event were to occur, he said.


“There would be a loss reserve recorded on their balance sheets, per participation in our pool, but we do have funds set aside for these catastrophic events where we wouldn’t be requiring any additional funds,” Cass said.

Damage to the power plant itself would be covered by Nuclear Electric Insurance Ltd., which insures electric utilities and energy companies in the United States. Current limits are $1.5 billion per site on the primary program, and up to $1.5 billion per site in its excess program.

Allan Koenig, vice president, corporate communications at Energy Future Holdings, which operates Comanche Peak, said the plant is robustly protected. It has two independent systems that can provide off-site power as well as backup diesel generators, to allow the units to be safety shut down in the event of natural catastrophes.

He also noted the plant has safety shields for fuel storage casks, a 45-inch-thick steel-reinforced concrete containment building wall, and fire protection redundancies.

As for the affected businesses and homeowners, they may be left in a swirling vortex of coverage confusion. The situation would have the flavor of what happened after Superstorm Sandy, when coverage often depended on whether damage was caused by flooding or wind surge.

The question for Texas insureds would be whether the damage was caused by the tornado or by the radioactivity.

“It’s an incredibly complex question and a complex issue that is really only solvable and resolvable if and when the incident occurs,” said John Butler, vice president of the environmental practice at Hub International.

“What it boils down to is the chicken and the egg scenario,” he said. “What came first? Either event has the ability on its own to create a total loss.”

Resilience and redundancy should be the key takeaways from this, said Peter Boynton, founding co-director of the Kostas Research Institute for Homeland Security at Northeastern University in suburban Boston.

“If we can retain a percentage of the critical function of whatever system we are talking about, the difference between 0 percent and 30 percent when the bad thing happens is huge.” — Peter Boynton, founding co-director of the Kostas Research Institute for Homeland Security, Northeastern University

Instead of viewing catastrophic events from an emergency management perspective, where the discussion revolves around what was — or was not — managed well, it’s better to look at the way design can lead to “continuity of function,” he said.

When Boynton was head of emergency management for the state of Connecticut, he managed the statewide response in 2011 to Hurricane Irene, which knocked out 70 percent of the state’s electric grid, leaving residents unable to access many gas stations, ATMs and grocery stores.

If the state had designed a “resiliency approach” prior to the event, it could have built in a pre-determined amount of redundancy into the system so that, say, an additional 20 percent or 30 percent of the grid remained viable.


“If we can retain a percentage of the critical function of whatever system we are talking about, the difference between 0 percent and 30 percent when the bad thing happens is huge,” Boynton said.

In the Texas scenario, if the crisis planning included a redundancy for warning nearby residents even when the power and communication lines failed — such as by using satellites to create a minimal level of continuity — the amount of death and destruction could have been lessened.

“Otherwise, we really are setting ourselves up for an impossible discussion,” he said. “You can’t just pick up these pieces at the moment of crisis. You have to understand how system design can play a role.”

Analyzing such a black swan scenario is a useful exercise, said Justin VanOpdorp, manager, quantitative analysis, at Lockton.

“Can this actually happen? Yes. Will it? Maybe not,” he said. “I think what it does is, it helps to think through it just to be prepared for those situations when they do arise.”



Additional 2014 black swan stories:

Bigger Than the Big One

When the 8.5 magnitude earthquake hits, sea water will devastate much of Los Angeles and San Francisco, and a million destroyed homes will create a failed mortgage and public sector revenue tsunami.

Sub-Zero Sucker Punch

A double dose of ice storms batter the Eastern seaboard, plunging 50 million people and three million businesses into a polar vortex of darkness and desperation.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]
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Infographic: The Risk List

7 Emerging Technology Risks

Innovative technology presents unforeseen risk exposures. Presented by Travelers.
By: | August 26, 2014 • 1 min read
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The Risk List is presented by:

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The R&I Editorial Team may be reached at [email protected]
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Sponsored: Aspen Insurance

When the Going Gets Rough, the Smart Come to Aspen Insurance

Aspen’s products liability team excels at solving tough problems and building long-term relationships.
By: | November 2, 2015 • 5 min read

Sometimes, renewals don’t go as expected.

Perhaps your company experienced a particularly costly claim last year. Or maybe it was just one too many smaller incidents that added to a long claims history.

No matter the cause, few words are scarier to hear this time of year than, “Renewal denied.”

But new options are now emerging for companies that are willing to tackle their product liability challenges head-on.

Aspen Insurance’s products liability team – underwriters, loss control engineers and claims professionals – welcome clients who have been denied coverage from other, more traditional carriers.

“For our team, we view our best opportunities to be with clients who have specific problems to solve. In these cases, we leverage our deep expertise and integrated team approach to help the client identify root causes and fix issues,” said Roxanne Mitchell, Aspen U.S. Insurance’s executive vice president and chief casualty officer.

“The result is a much improved product or manufacturing process and the start of a new business relationship that we can grow for many years to come.”

“We want to work with insureds as partners, long after a problem has been resolved. We seek clients who are going to stick with us, just as we will with them. As the insured’s experience improves over time, pricing will improve with it.”
— Roxanne Mitchell, Executive Vice President, Chief Casualty Officer, Aspen Insurance

Of course, this specialized approach is not applicable to all situations and clients. Aspen Insurance only offers coverage if the team is confident the problems can be solved and that the client genuinely wants to engage in improving their business and moving forward.

“Our robust and detailed problem-solving approach quickly identifies pressing issues. Once we know what it will take to rectify the problem, it’s up to the client to make the investments and take the necessary actions,” added Mitchell. “As a specialty carrier operating within the E&S market, we have the ability to develop custom-tailored solutions to unique and complex problems.”

For clients who are eager to learn from managing through a unique, pressing issue, and apply the consequential lessons to improve, Aspen Insurance can be their best, and sometimes only, insurance friend.

The Strategy: Collaboration from Underwriting, Claims and Loss Control

Aspen offers a proven combination of experienced underwriting professionals collaborating with the company’s outstanding loss control/risk engineering and seasoned claims experts.

“We deliver experts who understand the industries in which they work, which is another critical differentiator for us,” Mitchell said.

Mitchell described the Aspen underwriting process as a team approach. In diagnosing the causes of a specific problem, the Aspen team thoroughly vets the client’s claims history, talks to the broker about the exposures and circumstances, peruses user manuals and manufacturing processes, evaluates the supply chain structure – whatever needs to be done to get to the root of a problem.

“Aspen pulls from every resource we have in our arsenal,” she said.

After the Aspen team explores the underlying reason(s) and root cause(s) producing the client’s problem in the first place, it will offer a solution along with corresponding price and coverage specifics.

“We have a very specific business appetite and approach,” Mitchell said. “We don’t treat products liability as a commodity.”

As noted, a major component of Aspen’s approach is that they seek to work with clients who are equally interested in solving their problems and put in the work required to reach that end.

Aspen_SponsoredContentMitchell cited two recent client examples of manufacturers of expensive products that could endure large claim losses but had some serious problems that needed to be solved.

A conveyor systems manufacturer had a few unexpected large claims and lost its coverage in the traditional insurance market. The manufacturer never managed a product recall in the past, and Aspen’s loss control engineers dug into why several systems failed. Aspen also helped the company alert customers about the impending repairs.

Another company that manufactured firetrucks had three or four large losses, when telescoping ladders collapsed, resulting in serious injuries. The company’s claim history was clean until this particular product defect. When Aspen researched the issue, it found that the specific metal and welding used to make the telescoping ladders didn’t have the required torque to keep the ladders from collapsing.

Both companies worked with Aspen to correct the issues. Problem solved.

“It is so important that our clients are willing to actively engage in finding out what is causing their losses so they can learn from the experience,” Mitchell said.

Apart from the company’s problem-solving philosophy, Mitchell said, the willingness to allow qualified clients to manage their own claims is the second biggest reason companies come to Aspen.

“We are willing to work with clients who have demonstrated the expertise to handle their own claims — with our monitoring — rather than hiring a TPA,” she said. “It is a useful option that can save them money.”

Mitchell explained that customers who stay with Aspen for the long-term can be confident that Aspen will help them – whatever the challenge. For instance, if they need a coverage modification for a new product that they bring to market, Aspen can help make it happen. Mitchell noted, “We pride ourselves on the ability to develop custom-tailored solutions to address the complex and challenging risks that our clients face.”

Long-term Relationships

Aspen_SponsoredContentAspen’s desire to help solve difficult client problems comes with a caveat, but one that benefits both Aspen and the insured: It wants to move forward as a true partner – one with clear long-term relationship potential.

In a nutshell, Aspen’s products liability worldview is to partner with a manufacturer who is facing a difficult situation with claims or coverage, help them solve that problem, and then, engage in a long-term, committed relationship with the client.

“We want to work with insureds as partners, long after a problem has been resolved,” she said. “We seek clients who are going to stick with us, just as we will with them. As the insured’s experience improves over time, pricing will improve with it. This partnership approach can be a clear win-win.”

This article is provided for news and information purposes only and does not necessarily represent Aspen’s views and does constitute legal advice. This article reflects the opinion of the author at the time it was written taking into account market, regulatory and other conditions at the time of writing which may change over time. Aspen does not undertake a duty to update the article.


This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Aspen Insurance. The editorial staff of Risk & Insurance had no role in its preparation.

Aspen Insurance is a business segment of Aspen Insurance Holdings Limited.
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