Lloyd's: Space Weather Could Lead to $2.4trn Economic Losses

Lloyd's, the London-based insurance and reinsurance marketplace where underwriters and brokers negotiate coverage for complex risks, has published research indicating the global economy could face losses of US$2.4tn over five years from a hypothetical solar storm event.

The economic impact assessment forms part of Lloyd's systemic risk scenario programme, which models potential threats to global financial stability. The expected direct insurance loss from such an event would reach approximately US$17bn.

Regional economic vulnerability

The research models economic losses across three severity categories, with potential impacts ranging from US$1.2tn in the least severe scenario to US$9.1bn in the most extreme case. 

This represents a potential reduction in global GDP between 0.2% and 1.4%.

North America appears most exposed financially, with projected economic losses of US$755bn over the modelled period. Europe follows closely with estimated impacts of $697bn. 

Greater China and Asia Pacific regions face modelled losses of US$428bn and $375bn respectively.

The scenario analysis shows such an event could damage power grids and satellite networks that underpin critical infrastructure. 

These disruptions would affect businesses, governments and populations globally that rely on these systems daily.

Insurance response development

The insurance sector has created specialist products to manage solar storm risks. Lloyd's currently underwrites nearly a third of global space risks, including comprehensive coverage for satellites.

To ensure operational continuity across affected sectors, insurers offer policies covering energy infrastructure, business interruption, aviation operations, marine transport and agricultural production.

“Our research continues to highlight the need for businesses to be prepared and proactive against global risks,” says Rebekah Clement, Lloyd's Corporate Affairs Director. 

“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.”

The scenario forms the seventh and final analysis produced through Lloyd's Futureset in partnership with the Cambridge Centre for Risk Studies. 

The initiative aims to foster risk mitigation strategies against significant risks facing society.

Lloyd's has accompanied the research publication with a photography exhibition titled 'Life in the Sun's Atmosphere: From Disruption to Resilience' by space photographer Max Alexander, displayed in the Lloyd's Underwriting Room in the City of London.

The exhibition launch event brought together space weather scientists, insurance executives and UK government representatives, including Lloyd's Chair Bruce Carnegie-Brown, Parliamentary Secretary for the Cabinet Office Abena Oppong-Asare MP, and BBC's 'Sky at Night' presenter Professor Lucie Green.

“The Lloyd's Underwriting Room is synonymous with supporting the very limits of human exploration and knowledge gathering”" says Max Alexander, photographer and science communicator. 

“My aim for this exhibition is to showcase not only the incredible power of the sun as the lifeblood of our solar system, but the very real risks that its power can ultimately present for our everyday lives and infrastructure.”

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