After the meteor strike: coverage exclusions?

No one really expects meteors to cause insured damage very often, but a direct hit against a populous Russian area has one of Canada's largest brokerages raising the question: What's next for meteor coverage?

Will carriers start to exclude damage caused to homes by meteor hits?

It’s a question brokers might pose after meteor hit Chelyabinsk, a city in Russia's central Ural Mountains with a population of 1 million people, on February 15.

“There’s no exclusion typically on a homeowner’s policy for [a meteor hit], but who’s to say in the next month insurers won’t put exclusions on it?” said Cheryl Rutledge, senior vice president in the private client services practice of Marsh Canada Limited.

The question is not entirely speculative, particularly when disasters cause insurers billions of dollars’ worth of damage. This is exactly what happened after two hijacked commercial planes crashed into the World Trade Centre on September 11, 2001, destroying the twin towers, with more than 3,000 people killed or missing. After months passed, discussions led to policy exclusions for damage caused by terrorist events.

But what about meteor strikes? (continued)#pb#

Thus far, the industry doesn’t seem ready to debate meteor exclusions to homeowner policies. “There’s no discussion around excluding it from policies at this point,” Rutledge said. “It’s an Act of God, it happens, and you don’t expect it to be a re-occurring thing.”

The damage arising from the meteor strike in Chelyabinsk was extensive, catastrophe modeling company AIR Worlwide reported. Most of the damage was caused by shock waves after the meteor broke up in the atmosphere. The force of the explosion was enough to shatter dishes, televisions, and windows.

The explosion is estimated to have shattered more than 1 million square feet of glass. Preliminary reports suggest more than 3,000 homes and businesses sustained damage from broken glass, including a zinc factory where part of the roof collapsed.

Marsh Canada said it’s too early to tell whether the damage caused in Russia would be extensive enough to warrant a broader conversation about exclusions for meteor strikes.

And the chances of the event happening again seem so remote that the industry seems likely to focus its attention elsewhere. Air Worldwide reports that, on average, objects of this size pass this close to Earth once every 40 years, and strike the planet once every 1,200 years.

Could it happen in Canada? If it did, most homeowners’ policies, barring exclusions, would cover the damage, Rutledge said.

“Everyone would have to look at their exclusions in their specific policy,” Rutledge said. “A broad form policy may have specific exclusions, but, on an all-risk basis, if it’s not showing as an exclusion, then it’s covered.”

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