The next major global catastrophe could have extraterrestrial origins, according to a new report from Lloyd’s.
The report, Solar Storm Risk to the North American Electric Grid, details the widespread ramifications an extreme geomagnetic solar storm could wreak on the US and other advanced economies.
According to the report’s research, the globe is overdue for an extreme storm, which are estimated to strike roughly every 150 years.
A repeat of the last extreme storm, which in 1859 knocked out telegraph operations across North America, Europe and parts of Australia, could plunge up to 40 million US residents into darkness for anywhere between two weeks and two years.
“The total economic cost for such a scenario is estimated at $US0.6–$2.6 trillion,” the report states.
“The knock-on effects of loss of electricity are very difficult to quantify, but given the fact that our society is increasingly dependent on electricity they are likely to be severe and wide-ranging.
“If businesses, public services and households are without power for sustained periods of time, insurers could be exposed to significant business interruption claims, particularly as back-up supplies are only likely to last for a limited period.”
A prolonged black out could also trigger contingent business interruption policies, as well as widespread event cancellation.
In a worst-case scenario, the report’s authors speculate that a weeks-long loss of power would cause major disruption to transport, food supplies, emergency and hospital services amongst other things.
“For example, if pumping operations needed to be suspended that would quickly affect water and fuel supplies, sewage systems and flood defences,” it states.
“The absence of such fundamental services could lead to major and widespread social unrest, riots and theft with ramifications for the insurance industry and society in general.
“It is also likely that financial markets could be significantly disrupted by a severe space weather event, which would have major global financial impacts, including on insurers in terms of their investment portfolios.”