In a recently published systemic risk scenario, the specialist Lloyd’s insurance and reinsurance marketplace has highlighted that a hypothetical solar storm could expose the global economy to losses of $2.4 trillion over five years, with an expected loss of $17 billion from such an event.
Lloyd’s explains that global economic losses are modelled across three severity levels, ranging from $1.2 trillion in the least severe scenario to $9.1 trillion in the most extreme, corresponding to a reduction in global GDP of between 0.2% and 1.4%.
The most likely region to be impacted is North America in the given scenario, suffering a potential economic loss of $755 billion over the modelled five-year period.
The gap between North America and Europe is relatively small, however, with Europe calculated to take a $697 billion hit to GDP. Greater China and Asia Pacific have modelled impacts of $428 billion and $375 billion, respectively.
Lloyd’s explains that if this event happened today, it could cause damage to critical infrastructure such as energy grids, satellite networks, disrupt power, navigation, communications, and financial systems, which are relied upon daily by businesses, governments, and populations globally.
Currently, Lloyd’s covers nearly a third of all global space risks, including comprehensive satellite protection.
The global insurance sector has developed a range of solutions to help navigate these risks, and to ensure business continuity across impacted sectors, Lloyd’s highlights that other insurance policies are available for financial safeguard, including energy insurance, business interruption insurance, aviation insurance, marine insurance, and agriculture insurance.
Produced by Lloyd’s Futureset and the Cambridge Centre for Risk Studies, this solar storm study is the seventh and final scenario.
The study aims to encourage proactive conversations and solutions to mitigating risks against the most significant risks facing society today.
Rebekah Clement, Lloyd’s Corporate Affairs Director, commented, “Our research continues to highlight the need for businesses to be prepared and proactive against global risks.
“Historically extreme space weather has been rare, however, by equipping businesses, governments and insurers with data-based models we’re encouraging effective preparation stronger collaboration.”
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