Insurance industry may not be suited for powerful solar storms
Lloyd’s of London has released a new report concerning the emerging risks associated with powerful solar storms. A solar storm is produced by solar flares and coronal mass ejections that are directed in the general location of the planet. Typically, such events present no significant threat to the world as they are relatively rare and not directly targeted at earth. According to Lloyd’s, however, a direct hit from such an event could have cataclysmic consequences, especially for the insurance industry.
Natural disasters are a serious matter for the insurance industry
The insurance industry is already well aware of the myriad disasters that could befall the world at any given moment. Indeed, it is one of the primary functions of the insurance industry to understand the risks associated with powerful disasters and work to prepare for such events in the future. Adequate preparation can help the insurance industry withstand these disasters and aid in any recovery efforts that may be required in their wake. A powerful solar storm is, however, unlike other earth-born natural disasters and it may not be possible for the insurance industry to account for the magnitude of damage such an event could cause.
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Report suggests solar storms could be catastrophic for North America
According to the report from Lloyd’s, titled “Solar Storm Risk to the North American Electric Grid,” a powerful solar storm could cause significant damage to North America, especially in terms of energy infrastructure. The report suggests that a solar storm could leave tens of millions of people throughout North America without any form of electrical power for several month or years. Such an event would cause trillions of dollars in damages associated with loss of business and other aspects of life the insurance industry is involved in.
Insurance industry could be crippled from extreme space weather
The report from Lloyd’s uses the Carrington Event of 1859 as a benchmark. This event is widely considered to be the most extreme space weather event that has ever been recorded. If a similar event were to happen today in the U.S., some 40 million people would lose power for as much as two years. The economic damage caused by such an event could surpass $2.6 trillion, which could cripple certain sectors of the insurance industry as well as the U.S. government.