Counting the
economic cost:
How vulnerable
could you be?
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The economic impact
To help build societal resilience and inform risk mitigation around extreme space weather, we have sought to estimate the impact this hypothetical scenario could have on businesses and the wider economy across three levels of severity.
If a major solar storm were to take place, the global economic impact could, based on our calculations, reach $2.4 trillion over a five-year period (this represents the probability weighted average across the three severities we have modelled), with an expected loss of $17 billion (the economic loss multiplied by the probability of the event occurring).
The global losses across the three severity levels modelled range 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% over the period.
You can use the interactive tool below to explore the potential economic cost of our scenario across the three severity levels.
Recovery
The following chart shows the potential impact and economic loss from our scenario across the 5-year period modelled, with a major space weather event occurring in 2023.
The speed and scale of recovery from the initial GDP shock would be dependent on the socioeconomic resilience of each country and its position relative to geomagnetic exposure. For example, while the effects of the 1989 geomagnetic storm left millions of Québécois without electricity and caused hundreds of millions of dollars in damages and loss in revenue[11] , the damage was largely concentrated in Quebec.
In the lowest severity “major” scenario, impacts are limited geographically and therefore GDP can stabilise within two years. In the “severe” and “extreme” level scenarios, GDP takes much longer (up to four years) to return to pre-event levels. This slower economic recovery is due to sustained property damage, business interruption and recovery costs, as well as secondary or indirect disruptions to supply chains and other infrastructure.
[11] https://www.bbc.co.uk/news/science-environment-17301956
Regional risk
How exposed could your region or country be?
How quickly a city or country recovers from the effects of the scenario largely depends on their preparedness; the resilience of their infrastructure to withstand the impacts of space weather and their geomagnetic zoning, with the countries located in the highest latitudes at the greatest risk of impact. However, with a large coronal mass ejection, the area of impact may increase towards the equator.
Economic vulnerability to a solar storm is also dependent on the socio-economic resilience of the population. Even cities not exposed to the direct impacts of an intense geomagnetic storm would still see indirect effects due to power, internet, satellite or logistic disruptions. Therefore, regions with robust critical infrastructure and safeguards in place to handle electricity grid, radar and satellite disruptions will recover more swiftly, decreasing impact on GDP.
From a regional level, North America would be the most financially impacted (on an absolute basis) by this hypothetical scenario, suffering a potential economic loss of $755 billion. The difference in loss between Europe and North America is small, with Europe potentially exposed to a $697 billion hit to GDP. Greater China and Asia Pacific have modelled impacts of $428 billion and $375 billion respectively.
Use the tool below to explore the potential impact of the scenario on your region or country, at the three levels of severity modelled in the research.
Systemic events can affect individual countries, regions or the entire world at once. In our analysis of systemic risk, we use two different models to illustrate the economic impact an event could have on gross domestic product (GDP).
An aggregating model: In this model, a systemic event has a significant ‘ripple effect’ of impacts across the globe. The cost of the event is aggregated up from country and regional levels to provide a global economic loss number.
– For example, the COVID-19 pandemic quickly spread around the world, affecting many countries' economies in a significant way at the same time.
A non-aggregating model: Our non-aggregating model is used for events that have a smaller ripple effect and for scenarios where the global losses are not caused by a trigger event occurring simultaneously in multiple regions.
– For example, a major volcanic eruption is likely to have a much greater impact in the country in which the volcano erupts. In our non-aggregating model, we do not assume that multiple major volcanoes erupt at once.
– Country and regional data in a non-aggregating scenario is based on the event occurring in that region and/or country. Therefore, in a non-aggregating scenario, the sum of countries’ economic losses will not equate to total regional or global economic losses.
For this solar storm scenario, losses are calculated using an aggregating model.
Our analysis included:
• A likelihood assessment based on the observed frequency of solar flares of different magnitudes since 1976 and academic studies on extreme solar storms like the Carrington event.
• A threat assessment based on expert knowledge and approximate geomagnetic latitude according to the International Geomagnetic Reference Field (IGRF) model, noting that cities at high geomagnetic latitudes are at the greatest risk of disruption due to Earth’s magnetic field being a less effective shield near the poles. The assessment was done at city level and then aggregated to country level.
• A vulnerability assessment based on subject matter expertise, such as the strength and resilience of power grid infrastructure, to determine the potential extent of damage by country. Cities most exposed to a space weather event will experience the most severe consequences.
Our assessment of the impact to GDP at each severity level is based on a combination of scenario modelling, historical studies and subject matter expertise. The assessment estimates the direct impacts of an extreme space weather event, such as business interruption and recovery costs, as well as secondary or indirect disruptions to supply chains, other infrastructure and workforce mobility.
Cities most likely not directly exposed to a geomagnetic storm, could still see indirect effects due to power, internet, satellite or logistics disruptions. The subsequent recovery from the initial GDP shock is dependent on the socioeconomic resilience assessment of each country, considering impacts such as loss of radio communications, GPS, and interference to radar systems and satellite operations.
© Max Alexander/Lloyd’s “Life in the Sun’s Atmosphere”, please note a credit is required to use this image
Sector risk
Which sectors might be most at risk?
Space, energy, food, finance, communications and transport are all classed as critical national infrastructure by the UK government; assets essential for the functioning of society and, if disrupted, could have a significant impact on national security, national defence, or the functioning of the state[12]. These sectors, which we have explored briefly below, are all vulnerable to the effects of extreme space weather, with countless cascading impacts across the economy.
Space
Nearly every industry and business across the world relies on the day-to-day operation of satellites, for example Global Navigation Satellite Systems (GNSS) satellites are estimated to support £320 billion of UK GDP13. Satellites are also expensive to operate and replacement costs for a large constellation are estimated to be in the billions of dollars14. A solar storm increases the risk of satellite drag or collision, which could render satellites unusable or contribute to their rapid ageing. For example, in early 2022, SpaceX lost 40 new satellites shortly after a launch due to a geomagnetic storm, costing the company an estimated $100 million15.
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Communications
The internet, television broadcasting, mobile and telephone networks, and radio are all examples of communications that underpin many economic activities but can be severely hampered by a solar storm. For example, radio noise bursts generated by solar flares can interfere with cell tower antennae; subsea fibre optic internet cable repeaters used for data transmission can be affected by geomagnetically induced currents (GICs); and transmissions from communications satellites can experience signal scattering and interference. Communications are also dependent on power supply to ground segment systems and cellular networks, and with the evolution to 5G and 6G, reliance on GNSS has increased. In extreme solar storm events, data centres – also classed as critical national infrastructure – could potentially suffer data corruption and memory malfunction 16.
Energy
Energy grids are very vulnerable to outages due to space weather. Transmission and distribution networks and energy generation transformers are all directly impacted via exposure to GICs. Network synchronisation and offshore oil and gas drilling are also reliant on operational GNSS satellites. Sometimes, if the grid is working at full tilt with little capacity to spare, an outage can leave customers without power for some time until systems are repaired, and the downtime could be very costly due to our reliance on energy for everyday functions. The 1989 Geomagnetic Storm caused over 200 power grid problems coast to coast in the United States. Quebec in Canada suffered a 12-hour power outage affecting homes, schools, businesses, the Metro and the airport17 .
Transport
Reliance on satellites for power, communications and GNSS, mean the rail, road, maritime and aviation sectors are all at risk. The aviation sector could experience a range of impacts ranging from as small as flight delays to as dramatic as a mid-flight engine failure. Pilots would be unable to contact control stations, and both flying without GNSS coordination and potential radiation exposure could put the wellbeing of crew and passengers at risk. Road and maritime traffic both rely on GNSS for navigation, and recent technological advancements such as smart ports, smart motorways, electric road vehicles and digital rail signalling all could face impacts from power outages, high frequency interference and GICs. Supply chains across all industries would be impacted if the global movement of people and cargo is disrupted, and there is an increased risk of road and rail collision during signalling outages.
Agriculture
GNSS is crucial for modern agricultural practices including precision farming, which relies on accurate positioning and timing data for activities such as automated planting, fertilising, and harvesting. A failure in navigation satellites can disrupt these activities, leading to reduced efficiency and potential financial losses18. Even a few hours to half a day of lost signal can come with a cost for farmers – they may miss an optimum planting or harvesting window and pushing this work later into the season could cost famers their yield for the season19. In the May 2024 G5 solar storm, there were reports of high precision tractors going off-course and malfunctioning due to inaccuracies in their GPS-controlled technology20.
Financial services
Many critical financial systems rely on GNSS signals to conduct transactions worldwide. From trading system malfunctions to inoperable ATMs, the disruption to global financial market flows could impact financial liquidity and erode public trust in banks.
[13] SWIMMR S6: Space weather impacts on UK critical national infrastructure
[15 https://www.space.com/spacex-starlink-satellites-lost-geomagnetic-storm
[16] SWIMMR S6: Space weather impacts on UK critical national infrastructure
[17] https://www.nasa.gov/topics/earth/features/sun_darkness.html
[18] Pescaroli_cascading_effects_of_GNSS_failures ISO.pdf
[19] What Farmers Need To Know About Severe Solar Event With Potential To Disrupt GPS - AgWeb
[20] How Solar Storms Turned John Deere Tractors Into Demonic Machines
How can risk owners respond?
Extreme space weather is rare, but possible. It is vital that businesses and organisations take proactive steps to build resilience into their infrastructures to withstand disruption from space weather. Businesses highly dependent on communications or likely to be significantly disrupted by power outages should prioritise contingency planning. As should those more vulnerable to exposure due to their geomagnetic location - countries and cities at higher latitudes nearest to the poles (noting a strong coronal mass ejection (CME) will push impacts further towards the equator).
Preparedness: Businesses response plans should consider including education and monitoring of space weather forecasts, such as the United States’ National Oceanic and Atmospheric Administration (NOAA) Space Weather Prediction Center (SWPC), to recognise when a solar storm is more likely; crisis response drills for a range of scenarios; and risk assessments for the most business-critical application and power infrastructure.[21]
Transpower, owner and operator of New Zealand’s National Grid, successfully avoided any impact on New Zealand’s electricity supply following the G5 geomagnetic storm in May 2024 after working with experts at Otago University to develop protocols for dealing with space weather. Transpower switched off some circuits across the country as a precaution to prevent damage to equipment from the solar storm[22].
Contingencies: Establishing back-up generators and energy sources separate to the main grid, such as solar panels and storage batteries, can reduce any dependency on the local grid and tide critical locations over until repairs are made. With lengthy power outages possible, self-sustaining power sources can help to secure business continuity.
Safeguards: Space weather can cause both power surges and outages which can do more than just prevent hardware from booting up. Software and data can be corrupted, or hardware can be damaged. Power surges can cause fires at data centres potentially risking loss of important information and/or systems. Businesses are also vulnerable to opportunistic cyber-attacks as systems reboot and come back online. Businesses would be well advised to create backup systems, ideally with auto-save functions, implement surge protections to prevent burn out, and embed rigorous cybersecurity. Extra consideration is needed for hybrid working environments as staff may not have the same protections in place at home.
[21] pp_insights_research_briefing_-_space_weather_jul2016.pdf
[22] Transpower restores electricity transmission circuits after solar storm subsides | Transpower
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Disclaimer
This report has been produced by Lloyd's Futureset and Cambridge Centre for Risk Studies for general information purposes only.
While care has been taken in gathering the data and preparing the report Lloyd's and Cambridge Centre for Risk Studies do not, severally or jointly, make any representations or warranties on behalf of themselves or others as to its accuracy or completeness and expressly exclude to the maximum extent permitted by law all those that might otherwise be implied.
Lloyd's and Cambridge Centre for Risk Studies accept no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.
Note that this report does not seek to replace or inform any of the mandatory scenarios which Lloyd’s publishes to support the Realistic Disaster Scenario exercises managing agents are required to undertake in respect of the syndicates managed by them.