Solar storm threat has potential to deliver $90 billion shock to insurers

Insurers have been warned  that a major space storm has the ability to cost insurers even more than a record breaking major hurricane.

According to a new report from Bloomberg Intelligence (BI), the space storm which was witnessed between 10-12 may just be a taste of what’s to come, with the current solar cycle forecast to peak in 2025.

It added that if the world was to suffer a devastating space storm it had the potential to leave insurers faced with claims which would be akin to the losses suffered  when Hurricane Katrina struck the southern United States. The costs of Katrina were put at $55 billion in 2005 and would be equivalent to $90 billion today.  The fear is such a storm would have the capacity to interfere with radio communications, power grids, spacecraft and satellite navigation.

The National Oceanic and Atmospheric Administration’s space weather-prediction centre warned on 10 May  that a large sunspot cluster had produced a series of strong solar flares, several of which – with associated coronal mass ejections (CMEs) – were headed toward earth. CMEs are explosions of plasma and magnetic fields from the sun’s corona which can cause magnetic storms on earth and have the potential to affect infrastructure in near-earth orbit and on the planet’s surface, with the potential to impede communications, electric power grids, navigation, radio and satellite operations.

G5 is the space weather prediction centre’s highest level on its scale of geomagnetic storm warnings. The last G5 storm in October 2003 led to power outages in Sweden and damaged transformers in South Africa, notes BI.

Charles Graham, BI senior industry analyst – Insurance, said: “Evidence from 10-12 May suggests the level of disruption caused by the solar storm on this occasion was relatively modest. There were no significant power failures, though extreme deviations in electrical wave patterns were widely observed across the US. Elon Musk’s Space X Starlink internet constellation reported a degraded service, but it quickly returned to normal. The storm was also sufficient to result in navigational errors in tractors and other equipment relying on GPS and drove some farmers in the US and Canada to halt planting. Aircraft were also diverted to reduce the exposure of passengers and crew to radiation.

“The outcome could nevertheless have been much worse, which explains why the UK regards space storms as one of the highest priority natural hazards in its National Risk Register.”

The early warning of solar-storm events may prove key to protecting an increasingly digitally connected world, added BI. The globe is protected by a network of space weather-prediction centres including the National Oceanic Atmospheric Administration in Boulder, Colorado, and the Met Office in the UK. A key focus of their work is monitoring solar activity to identify when solar flares and coronal mass ejections may be heading toward earth.

Graham added: “NASA is using artificial intelligence to analyse spacecraft measurements of solar wind to predict when an impending solar storm might strike. The technology could provide 30 minutes notice of where a geomagnetic storm is likely to occur anywhere on earth, enough time it is hoped for power grids and other critical infrastructure to take preventative measures.”