A home experienced a surge due to a downed power line.
The surge traveled through the branch circuit that feeds a 110 volt gas dryer and other receptacle outlets on the same circuit(it is an older city home without a dedicated laundry circuit) and resulted in an arc from the dryer receptacle to the nearby gas line. No fire, just soot marks.
The insurance company wants to know if the branch circuit wiring is compromised.
Using a megger, I get 250,000 ohms
(1/4 megohm) between hot & ground.
I believe the rule of thumb is 1 megohm plus 1 more megohm for every 1,000 volts.
I think I should recommend replacement of the branch circuit wiring.
Any thoughts?

I agree. I would replace the branch wiring at least.

Redsy
I also agree that the reading is too low and you should replace the affected wiring.

Agreed. If the cable were in good shape I would expect a reading much higher than this (certainly up in the tens of megohms region).

Thanks for the quick help guys.
Much appreciated!

Redsy. I agree with the other posters but only if you preformed the test with all the proper precautions.
1.Was the romex cleaned correctly to remove the carbon residue? Since carbon will effect your reading.
2. Was you able to strip back a small amount of the romex? Sometimes you can cut off the first 3/4" to 1" and will change your reading.
3. What was you testing voltage? This would depend on what your insulation value is, normally 600V. I usually will not exceed 1000V even though you could test to 3000.
The problem with using a megger most don't go to the proper training school/seminar and learned from an old timer thats been doing for years and really didn't know what he was doing, then end up doing work that is not needed because the proper test proceedures were not followed. I am not saying you don't know the proceedures just some helpful advise.