Back in 1859, a solar storm of incredible magnitude hit Earth. So strong was the electrical blast that aurora events, usually restricted to the extreme northern and southern poles of the planet, could be seen as far north as Queensland.
However, it was 20 years later when Thomas Edison would create the first light bulb, and electricity was not as critical to society as it is today, meaning the event’s impact was minimal. Another solar storm of similar strength would cause damage of a scale unseen before in the modern age.
This was explained by insurer Lloyds in a recent report presented to the Australian and New Zealand Institute of Insurance and Finance Convention. Created in collaboration with the Atmospheric and Environmental Research organisation, the study predicted that there is now a 12 per cent chance of a solar storm of this magnitude occurring within the next 10 years.
Lloyd’s General Representative Chris MacKinnon said the economic loss of such an event would be in the region of US$2.6 trillion (AU$3.6 trillion), affecting 20 to 40 million people, and causing millions to make business insurance claims.
The duration of possible power outage is difficult to determine, with the insurer predicting it would be between a rather substantial 16 days and an unbelievable two years. In such an instance, claims on business interruption insurance would reach new levels, as all organisations try to stay financially afloat without critical power resources.
“Business interruption is likely to be only one aspect of potential insurance exposure. A major space weather event could disrupt supply chains and this might trigger contingent business interruption cover,” Mr MacKinnon said.
“It is also conceivable that major power outages could result in liability claims if, say for example, employees’ safety was compromised or the public were put at risk.”
With manufacturing, retail, farming and practically all other businesses likely to be affected, it remains to be seen whether such an event comes to pass.