On June 30, 1908, the insurance industry dogged a bullet when an explosion leveled miles of forest near the Tunguska River in central Siberia. While still subject to some debate, the damage is largely attributed to a medium-sized comet or asteroid exploding in the lower atmosphere above the forest.

Though such events are rare, a new report from Newark, Calif.-based Risk Management Solutions Inc. (RMS) assesses the impact of a Tunguska-type event over a densely populated region.

“The 1908 Tunguska event led to very few casualties and no property losses because it occurred in a remote region of Siberia,” the report states. “A reproduction of this event over a highly populated region could lead to hundreds of thousands of casualties and hundreds of billions dollars of damage. It would also cause losses beyond the capacity of the insurance market.”

Due a lack of data from the original impact from which damage inferences can be made, when modeling such an impact to present day New York City, modelers rely on damage assessments from modern day explosives. The Tunguska event is thought to be the equivalent of a 10-megaton TNT explosion, roughly 1,000 times as powerful as the nuclear bomb dropped on Hiroshima in 1945.

Accordingly, the report, “Comet and Asteroid Risk: An Analysis of the 1908 Tunguska Event,” predicts if a medium-sized comet exploded over the borough of Manhattan, the damages would be massive. With the damage footprint encompassing the outer boroughs and Northern New Jersey, total losses may well top $1 trillion.

“Total economic exposure measures $760 billion between the outer and inner contours of the footprint, and $1.38 trillion inside the inner contour,” the report states. “As a result, property losses are estimated at approximately $1.19 trillion.”

Fortunately, the study notes earth-impacting objects of appreciable size are exceedingly rare, estimating a mean return period of 1,000 years (range from 400 to 1,800 years) for collisions with objects similar in size to the 1908 Tunguska event. What’s more, with oceans covering 70% of the earth’s surface, the odds of a direct strike on a metropolitan area are further reduced. Yet, no matter how remote the possibility of such an event insurers need to take precautions, RMS states.

“While the modest premiums appropriate to be charged for the risk would be uniform across land areas (although a tsunami premium may also need to be added for coastlines) it seems unlikely that insurers would bother to add this charge explicitly to their pricing models,” the report concludes. “At the same time, an insurer should be aware (similar to managing earthquake risk), even at the extremely low probabilities determined here, that having a portfolio concentrated in single city creates a greater probability of ruin for an impact than a well-distributed portfolio.”

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