In a world filled with dangerous surprises for global insurers, the next unexpected risk to watch for is the small likelihood of a large, “city-killing” asteroid colliding with Earth in 2032.
And yes, in case you are wondering, objects falling out of the sky are covered under insurance policies. Although insurers now have time to question whether or not they should be.
Paul Kovacs, executive director of the Institute for Catastrophic Loss Reduction (ICLR) — the research arm of Canada’s property and casualty industry — received a call in 2008 to help advise the Secretary General of the United Nations on how to prepare for an asteroid hit. Working with Russian and American astronauts, he and the advisory group provided the UN with a plan for handling the risk of damage caused by an asteroid hit.
“It’s now been several years, and for the first time ever in the world, the word has gone out to activate the plan,” Kovacs told Canadian Underwriter in a recent interview.
NASA’s Center for Near Earth Object Studies (CNEOS) has its eye on Asteroid 2024 YR4, which is currently estimated to be around 55 metres wide and was first discovered in December 2024.
CNEOS now estimates the chance of the asteroid hitting Earth in 2032 is 3.1%. As scientists point out, that means there is a 96.9% chance it will miss Earth entirely.
But if it hits Earth, the impact from a meteorite that large could be catastrophic. NASA has run several hypothetical damage scenarios; all of them depend on the exact size of the asteroid, which is still being examined.
Based on its current known size, the impact of a hit by Asteroid 2024 YR4 would result in the equivalent of a 7.7-megaton blast, CNEOS estimates. (The nuclear bomb dropped on Hiroshima in 1945 had an explosive yield of about 0.015 megatons.)
If Asteroid 2024 YR4 hits Earth, it’s highly likely (about 75% to 80%) it will hit water, Kovacs points out.
But if a meteor between 50 m and 280 m were to hit land, one of NASA’s hypothetical scenarios states, “blast damage areas would most likely extend [about] 40 km to 110 km in radius, and possibly out over 200 km in the largest cases.”
Such an impact could affect anywhere between zero to 5 million people, depending on where it lands, NASA says. Blast damage could range anywhere from shattered windows and structural damage to ignited clothing, third-degree burns, or unsurvivable devastation caused by burned and flattened buildings.
Kovacs says scientists are currently modelling hypothetical scenarios similar to how insurers use models to determine potential damage from natural catastrophes such as earthquakes, hurricanes, severe weather storms, or wildfires.
As of this writing, scientists have calculated the impact risk corridor of Asteroid 2024 YR4 stretches near the equator eastwards from the Pacific Ocean, over South America, the Atlantic Ocean, Africa, the Middle East, and into Asia.
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Even if the chance of it hitting Earth is 3.1%, “the chance for Canada is zero, the chance for the U.S. is zero, and the chance for Europe is zero,” Kovacs says. “But under that arc is Kolkata…and if it came down on [Kolkata], that’s a big deal. We’re talking about millions of people dying.”
Eight out of the world’s 100 most-populous cities hold the largest risk of impact, including Bogotá, Abidjan, Lagos, Khartoum, Mumbai, Kolkata and Dhaka, as reported by the Independent, citing NASA data.
Should asteroid damage be covered?
In a 2004 paper on the topic, Kovacs noted that insurance policies do cover damage caused by meteor impacts. His paper raises the question of whether they should cover it, given the low frequency but high severity of potential damage.
“Meteorites larger than a few dozen metres that strike a major urban centre could overwhelm the insurance industry,” Kovacs and co-author Andrew Hallack wrote in Limits to Insurance. “There is a very low probability that this will occur, but the high consequences imply that the insurance industry should pay more attention to this hazard.
“Some specific actions the industry should consider:
- Should insurers and reinsurers continue to cover damage from meteorite impact?
- How can insurers encourage loss prevention and preparedness initiatives?
- How can insurers work with governments and international agencies to manage threats like meteorites that are beyond the financial capacity of the insurers to address alone?”
But as meteor impact risk modelling becomes more precise, the damage could be excluded since the event would cease to be unpredictable — which is a fundamental aspect of insurance coverage, Kovacs tells CU.
“I called a bunch of insurance companies [and asked], ‘If you know an asteroid’s going to hit the planet, and it’s not going to wipe out the planet but will cause really serious problems where it hits — and you know where it’s going to hit — will you pay for that?’
“And they said, ‘Well if it’s coming eight years from now, I will probably have renewed every insurance policy eight times. At some point, I’m going to take that [coverage] away, knowing with certainty that there’s going to be an asteroid hit [on a specific city or area],’” Kovacs says.
“So, when I wrote my paper, it is covered by insurance. But if you predict it and see it coming, [coverage] will probably be taken out of the policy before it happens.”
As for managing the risk, Kovacs notes the potential for damage on Earth rises exponentially if you try to destroy the asteroid by breaking it up into many pieces.
“If you go up [into space] and then blow it up, you still have all the pieces coming our way,” he says. “It’s just that now they’re going [to hit Earth] in lots of places instead of just coming at one [spot].
“So, the analysis for some time is…blowing [the asteroid] up is probably not going to help.”
Enter NASA’s Double Asteroid Redirection Test (DART) mission in 2022, which diverted an asteroid twice the size of Asteroid 2024 YR4, as the Independent writes. “Another asteroid-redirection test undertaken by China is set to take place in 2027 on a smaller asteroid.”
Feature image courtesy of iStock.com/RomoloTavani (elements of the image credited to NASA)
