On November 10, 2008, millions of people were left without electricity in two of Brazil’s biggest cities, São Paulo and Rio de Janeiro, as a result of a massive power failure. The outage also had a significant impact on telecommunications and the Internet routing system in a number of South American regions. According to CircleID Reporter, while Brazil took the largest hit, Paraguayan and Uruguayan networks also went out “as a result of the largest regional power outage to hit Brazil and its neighbors in several years.”

The losses arising from these types of outages can staggering. Recall in early July of 2008, when the network of Brazilian unit of Spanish telecom Telefónica (NYSE: TEF) was disrupted, leaving its 2.2mn Speedy broadband customers without internet access for about 36 hours in the state of São Paulo. According to Business News America, Zurich had said that it would set aside 24mn reais (US$15.2mn) for refunds to compensate for the service interruption.

Prompted by the internet losses, the Brazilian unit of Swiss insurer Zurich began offering a new civil liability insurance product in August of 2008 in the wake of a large-scale internet outage, reported the local financial daily Gazeta Mercantil. The product covers third-party damage and operational shutdowns resulting from service disruptions, according to the report.

According to Zurich Brasil’s financial insurance lines executive ,Vinicios Villela Jorge, “Many businesses were wanting to know whether the insurance market would make this type of product available so that they could require [clients] to get this policy when contracting their services.” It will be interesting to see whether new insurance products become available on the market as a result of this most recent network failure.

SOURCES: CircleID Reporter; BNAmericas