Lloyd’s has published its latest systemic risk scenario, highlighting that the global economy could be exposed to losses of up to $9.1 trillion over a five-year period in an extreme space weather incident.
A space weather scenario of three differing severity levels was explored by Lloyd’s Futureset and the Cambridge Centre for Risk Studies. These levels were designed and calculated by analysing historical geomagnetic storms and their socio-economic impacts. The assessment of impact to GDP at each severity level of the scenario was based on a combination of scenario modelling, historical studies, and academic expertise. The assessment considers how different regions might manage the initial impacts of a solar storm, and the long-term economic impacts, such as effects on the electricity grid, satellites, communications systems, supply chains, and impacts on financial systems.
The research found that the expected five-year global economic losses across the three severity levels ranged from $1.2 trillion in the least severe scenario to $9.1 trillion in the most extreme, equivalent to a reduction in global GDP of between 0.2% and 1.4%.
North America was identified as the region likely to be most financially impacted by the scenario, however, the gap between the impact on North America and Europe is relatively small.
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 and stronger collaboration.
Rebekah Clement, Lloyd’s Corporate Affairs Director
What is space weather?
Space weather is the result of a ‘solar storm’, a sudden and intense burst of radiation and energetic particles blasted from the Sun. If large enough and directed towards Earth, space weather has the potential to severely damage critical infrastructure and create significant disruption across multiple industries and everyday activities.
Lloyd’s designates space weather as a systemic risk: a low likelihood, high impact risk, which affects either a systemically important global enterprise or multiple sectors, societies, or national economies. Such risks can be global in impact, often hitting billions of people simultaneously.
