The Intelligent Quarterly from the publishers of The Insurance Insider

Summer 2018

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Sun storm

Lucy Jones

What would happen if the biggest space weather storm ever recorded was to take place today?

A repeat of the 1859 Carrington Event, which led to a geomagnetic disruption so forceful that US telegraph operators saw sparks fly from their apparatus, would have catastrophic consequences in today's high-tech world, according to AIG-funded research by the University of Cambridge's Centre for Risk Studies.

US insurance industry losses resulting from three variants of extreme space weather events, as detailed in the Cambridge study, "Helios Solar Storm Scenario", published last November, were estimated at between $55.0bn and $333.7bn.

The study estimates that just over 90 percent of this loss would be from property insurance policies for service interruption within those entities that lost power, while 1 percent would be from direct physical property damage.

Global supply chain disruptions were conservatively estimated to range from $0.5tn to $2.7tn across the three scenario variants.

To put this in perspective with regard to major property catastrophe losses, Swiss Re has estimated that insured losses from Hurricane Katrina and Superstorm Sandy were $45bn and $35bn, respectively.

"The real concerns for solar storm risks are the 'silent coverages' which could be triggered, related to power outages and business interruption," says Michelle Tuveson, executive director of the Centre for Risk Studies, who led the Helios Solar Storm Scenario study.

"Proactive measures that insurance companies can take include managing their accumulation risks more closely," she adds.

This might include, for example, monitoring concentrations across power grids around the world when considering potential power outages.

Learning from Quebec
Extreme space weather events are now widely recognised as a realistic threat to electrical power grids by governments and power providers, but the art of quantifying the risk and insuring it is still very much in the early stages.

Part of the problem is that the Carrington Event, which is the largest recorded electromagnetic storm, is no longer in living memory.

The best known recent example is the solar disturbance that resulted in a nine-hour power outage in the Canadian province of Quebec in 1989.

An explosion on the surface of the sun resulted in a coronal mass ejection - the release of a cloud of electrically charged particles. After two days of travelling at a million miles per hour, the ejection collided with the earth's magnetic field, causing a geomagnetic storm that in turn induced a powerful electrical current in the soil of North America.

The fact that much of Quebec lies over the Canadian Shield, an extensive layer of bedrock that sits below a thin soil layer, meant the currents found a weakness in the electrical power grid operated by Hydro-Quebec, at around 2.44am on 13 March. In less than two minutes the entire network was down.

Thousands of people were left stranded in dark office buildings, underground pedestrian tunnels and lifts. Both the Montreal Metro and airport were closed for several hours. The Quebec outage was a 1-in-30-year occurrence, whereas the Helios solar storm scenario is a 1-in-100-year Carrington-scale event.

The Carrington Event was named after English astronomer Richard Carrington, who discovered the connection between activity on the sun and electrical disruptions on earth.

According to Catherine Burnett, manager of the space weather programme at the UK's Met Office, a Carrington-scale event is overdue.

"In terms of space weather, we could get a severe event at any point. They don't necessarily tie into periods when the sun is at its maximum activity - it can happen when the sun is relatively quiet, as it is at the moment," she says. "You only need one sun spot."

Space weather events

  • 1847 - First recorded storm caused "anomalous currents" on UK telegraph lines
  • 1859 - Carrington Event caused telegraph systems to catch fire
  • 1882 - A storm caused disruption to US telegraph systems and interrupted trading on the Chicago Stock Market
  • 1921 - A storm similar in size to the Carrington Event caused fires at telegraph stations in Sweden
  • 1958 - Transatlantic communications were disrupted between Newfoundland and Scotland
  • 1989 - A storm caused the Quebec power grid to collapse
  • 2003 - Halloween Storms led to a one hour power cut in Sweden and disruption to GPS systems

Source: Cambridge Centre for Risk Studies


"We've developed lots of great technology but it has never had to withstand large solar events and it is not designed necessarily to deal with those. Potentially, we are making ourselves more vulnerable," says Burnett.

The UK government is most concerned about the effect of solar storms on the electricity grid. A Carrington-size event has been on the UK national risk register since 2012.

Meanwhile, the Met's Space Weather Operations Centre started operating 24/7 in 2014.

"In terms of transformer damage, we are better situated in the UK than potentially other parts of the globe," says Burnett. "We are quite a small country, so we don't have very long power lines, which helps us."

But solar storms could impact other areas, including global satellite navigation systems.

Space weather can damage the satellites themselves, while changes in the atmosphere can prevent satellite signals from reaching the ground.

"That could be critical because GPS-based timing systems have proliferated throughout our modern technology in ways that people are completely unaware of," says Burnett.

For example, many modern building management systems use Scada (supervisory control and data acquisition) systems, which rely on the GPS signal for time synchronisation - a service that could easily become disrupted during a solar event.

Electromagnetic disturbances can also disrupt railway signals and track operations and radio wave transmission, and cause cumulative damage to pipelines.

During a period of extreme space weather, aviation routes may need to be altered to avoid high latitude regions, due to the threat of disruption to communications. These routes include the New York to Tokyo and the Toronto to Hong Kong passages.

And radiation bursts can cause spacecraft drag, resulting in uncontrolled re-entry for satellites in low orbits.

Assessing space weather risks
The level of insurance against space weather events is unclear and untested. In many standard insurance policy forms the power outage may be excluded by the fact that it was caused by something off-premises.

However, it has become very popular in the US, particularly with business insurance policies, to offer off-premises service interruption cover.

"A space weather event is relatively without precedence in terms of it being tested against policy language, in a legal sense," says Kyle Beatty, senior vice president of Verisk Insurance Solutions.

"There is some uncertainty to how it would be evaluated. What I can say is that it's in the forefront of the minds of [executives] in many insurance companies."

From a frequency perspective, he compares a space weather event to the large earthquakes that the New Madrid Fault Line is thought to have the potential to produce.

Running from Illinois, through Missouri to Arkansas, the zone had a series of three to five major earthquakes (believed to have been magnitude 7.0 or greater) between December 1811 and February 1812.

The New Madrid Fault Line does not produce earthquakes every year or even every few years in the way major active fault lines do. However, when considering activity over a few hundred years, there have been enormous events in the area covered by the fault line that have impacted large parts of the US, Canada and Mexico.

"If it affects a big part of the continent when it happens, but there isn't a lot of recent experience. People can kind of discredit it because they haven't had first-hand experience with it," says Beatty.

"I think the same is true with space weather. It feels to many people not to be a real threat because they don't have first-hand experience of it."

Potential impact of solar storms

  • Power blackouts
  • Cumulative pipeline damage
  • Railway signal and track disruption
  • Satellite transmission interruption, including those enabling GPS
  • Spacecraft drag causing uncontrolled re-entry
  • Radio communication disruption
  • Distortion of timekeeping instruments

Source: Cambridge Centre for Risk Studies, Met Office


Space exposure
So what can insurers do?

Verisk has modelled space weather events and has undertaken portfolio-specific modelling for individual companies. It says demand for services in this area is on the rise.

"Insurance companies really need to take a quantitative look at the exposure their portfolios have associated with service interruption," says Beatty.

"For the most part, I have observed that level of risk is underappreciated."

According to Tuveson at the Centre for Risk Studies, insurers should also look at how prepared a country or region may be for space weather events, and how seriously the risk is taken by network operators and the government.

For example, if during a solar storm a transformer sustains damage and a spare is available, it could be brought in from a central storage facility within 14 days. However, the destruction of a transformer could equally take many months to resolve.

Securitisation of space risk will require further development of parametric triggers as well as structured price plans, Tuveson notes. That is one area where research on this subject needs to head next - as well as to making improvements in the modelling of transmission grids and empirical determination of the potential damage to transformers from an extreme space weather event.

In Tuveson's view, considering the level of uncertainty which persists in our understanding of the impact of space weather on modern society, much more work needs to be done in this area.

This article was published as part of issue Spring 2017

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