Lloyd’s of London has released a report cautioning that a massive electricity network interruption could occur.
According to a new report from Lloyd’s of London, the insurance industry in North America could be highly affected by a severe space weather event, as it could lead to a massive electricity network disruption throughout the continent.
The report was called “Solar Storm Risk to the North American Electric Grid” and was released as a caution.
It expressed that the insurance industry could find between 20 to 40 million Americans at risk of an extended electricity outage that could last from one to several years should an extreme geomagnetic storm occur at a Carrington level. The report said that the impact that this type of event can have on electrical loss can be very difficult to measure.
It stated that the insurance industry could face widespread and long term claims as a result.
The report from Lloyd’s said that “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.” It also cautioned that this could lead the insurance industry to experience massive exposure from the considerable business interruption claims that would be submitted when homes, businesses, and public services must continue without power for a sustained period.
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This situation would worsen for the North American insurance industry as the backup power options would be sustainable only over a limited period, continued the report. Though a typical business interruption policy would necessitate that actual physical damage must occur in order to be able to make a claim, a major space weather storm could cause transformers to be damaged, which could indeed lead to physical damage.
Even without any equipment damage, should a pure voltage collapse occur, the grid’s own incapacity could be labeled as “physical damage”, as it is not capable of performing its basic functions, noted the report. This would eliminate any buffer or protection against exposure that the insurance industry may feel that it has, particularly as business interruption is unlikely to be the only exposure that it could face.