As a new solar maximum approaches, the historic Carrington Event draws parallels to contemporary natural catastrophes, highlighting the potential for significant economic and operational losses.
Like earthquakes that gradually build up stress before releasing it in sudden ruptures, the sun undergoes similar cycles of mounting magnetic tension. This cyclical solar activity occurs about every 11 years, marked by phases of low and high activity, known respectively as solar minimum and solar maximum. During the solar maximum, the sun unleashes powerful forces, including solar flares and coronal mass ejections, which can significantly disturb Earth's magnetosphere, leading to geomagnetic storms that may disrupt communication systems, power grids and satellite operations.
Sunspots — dark patches on the sun caused by magnetic fluctuations — are vital indicators of the sun's magnetic activity and help predict the phases of the solar cycle. We are currently in solar cycle 25, which began in December 2019 and is expected to reach its peak around July 2025 (Figure 1).
Earthly consequences
Readers fortunate enough might have observed visual displays of auroras in May 2024. This was a direct result of the most powerful solar storm since October 2003, reflecting the heightened solar activity that marks the ramp-up toward the solar maximum phase of the cycle. While these solar outbursts are spectacular to observe, they also have the power to disrupt our technology-dependent society significantly. Recent disruptions include:
- Satellite failures In February 2022, two coronal mass ejections caused up to 40 Starlink satellites to reenter Earth's atmosphere shortly after launch,1 costing about US $25 million.
- Communication disruptions In December 2023, one of the largest ever solar radio events disrupted radio aircraft communications.2 In November 2015 (solar cycle 24), a solar storm closed Sweden's airspace for nearly an hour, disrupting flights.3 One study indicates that during solar flares, flight departure delay time increases on average by 21% (eight minutes).4
- Power outages A major coronal mass ejection in March 1989 (solar cycle 22) significantly interfered with the U.S. power grid and caused a nine-hour power failure in Quebec, costing US $13.2 million.5
These incidents underscore the capacity for substantial economic disruptions and considerable financial pressures on businesses, governments and particularly the insurance industry.
Not quite black or white
Solar flares epitomize the concept of a gray swan event. Unlike black swans, which are unpredictable and exceptionally rare events with severe consequences (such as the 2011 Tōhoku earthquake), gray swans like solar flares are not entirely unforeseen. They are characterized by some level of predictability based on historical patterns or scientific forecasts.
The challenge with solar flares lies in their irregular occurrence and significant variance in intensity, making accurate predictions difficult. Their unpredictability and the scarcity of recent precedents complicate financial impact assessments. Consequently, existing underwriting processes inadequately account for the risks posed by solar flares due to the lack of a reliable predictive model and limited historical loss experience.
The most powerful solar storm in known history
The strongest event in known history — the "Carrington Event" — occurred on September 1 and 2, 1859 (solar cycle 10). Named after the British astronomer who reported it, the storm caused telegraph systems in Europe and North America to fail. Some operators were still able to transmit messages even after disconnecting power, as the geomagnetic storm induced electrical currents in the telegraph wires. That evening, the auroras were seen worldwide. In Montería, Colombia, José Inés Ruiz painted an exceptional scene: "pitch-black stormclouds furrowed by blazes of strange resplendence" and "immense flaming tongues and blinding igneous globules ... giving the impression of a hundred erupting volcanoes."6
Now more than 130 years later, our planet has yet to experience a solar storm comparable to the Carrington Event (Table 1). But we should not assume the odds of a similar event in our future are zero. According to tree rings, the Earth has been hit by at least six solar events larger than Carrington, by an order of magnitude or more, during the past 10,000 years.7
Table of selected solar storms to have impacted Earth and their corresponding disturbance storm time index
Financial footprints
With advancements in technology and increased dependency on electronic systems, a modern-day Carrington Event could cause unprecedented economic and societal disruptions. Estimating the potential impacts on vehicles, property and power grids is challenging due to limited historical precedents and modeling studies; however, current best estimates indicate that U.S. insurance industry losses, were such an event to occur today, could range between US $71 billion and $433 billion (in 2024 US$),8 with global losses significantly higher.
To put these figures into perspective, consider other notable natural disasters (Figure 2):
- Hurricane Katrina (2005) resulted in insured losses of approximately $105 billion (in 2024 US$).
- Insured losses for Hurricane Ian (2022) and the 2011 Tōhoku earthquake sit at the lower end of the Carrington loss range.
- Total insured losses from all natural catastrophes in 2024 exceeded US $140 billion.
$105 bn
2024 equivalent approximate insured losses of 2005 Hurricane Katrina
$140 bn
exceeded in total insured losses from all natural catastrophes in 2024
$183 bnto
over $1 trillion 2024 equivalent of global GDP at risk from a Carrington-style event
The global GDP at risk from a Carrington-style event is estimated to range from US $183 billion to over $1 trillion (in 2024 US$).9 The wide range of potential outcomes demonstrates the significant financial implications that solar flares could impose. Unlike other natural disasters, which are often regionally confined, the impact of a Carrington-style event would be global — directly affecting supply chains and disconnecting large populations from power for weeks or months.
Unlike other natural disasters, which are often regionally confined, the impact of a Carrington-style event would be global — directly affecting supply chains and disconnecting large populations from power for weeks or months.
A near miss
As we approach the peak of solar cycle 25, the potential for severe solar storms and their impact on the insurance industry and global economy intensifies. Although the likelihood of a catastrophic solar event occurring remains low, it is not zero.
A near miss in July 2012 highlights the risk: A solar storm of comparable magnitude to the Carrington Event erupted,9 but Earth was not in the line of impact. Had it occurred nine days earlier, Lloyd's estimated an economic cost ranging from US $0.8 trillion to $3.5 trillion (in 2024 US$).10 The small but significant chance (4%)11 of a direct hit from this event emphasizes the need for robust preparedness as we near a solar maximum.
Comparing solar activity to familiar natural hazards highlights the unique challenges of these gray swan events. Unlike well-documented and often localized natural disasters, severe solar storms are less frequent and more far-reaching. Their implications include:
- Damage to trans-oceanic communication cables, disrupting global communications
- Satellite failures causing significant data losses
- Disruptions in global navigation systems impacting air and sea navigation
Each of these scenarios poses substantial risks to global connectivity and, by extension, the global economy. Ultimately, when it comes to solar storms and their potential to disrupt our modern world, it's not a matter of if, but when.
Implications for risk managers
Scenario analysis
Develop scenarios, such as a repeat of the Carrington Event, to understand and quantify exposures to geomagnetic storms and potential financial losses, including both direct and indirect impacts.
Disaster preparation
Implement measures to mitigate the risks associated with solar flares. Develop contingency plans for rapid response and ensure risk management frameworks account for the potential scale and scope of solar flare impacts.
Enhance resilience
Use insights from near-misses to enhance preparedness and resilience plans. Ensure adequate insurance coverage and robust business continuity plans are in place.
Footnotes
1. LiveScience. Geomagnetic storm sends 40 SpaceX satellites plummeting to Earth. (2022).
2. NOAA. Strongest Solar Flare of Solar Cycle 25. (2023).
3. CBC. Solar storm knocks out flight control systems in Sweden, grounds planes. (2015).
4. Xu, X. H., et al. Characteristics of flight delays during solar flares. Scientific Reports, 13(1), 6101. (2023).
5. Bolduc, L. GIC observations and studies in the Hydro-Québec power system. Journal of atmospheric and solar-terrestrial physics, 64(16), 1793-1802. (2002).
6. Cited in Cárdenas, F. M. et al. The grand aurorae borealis seen in Colombia in 1859. Advances in Space Research, 57(1), 257-267. (2016).
7. Zhang, Q., et al. Modelling cosmic radiation events in the tree-ring radiocarbon record. Proceedings of the Royal Society A, 478(2266), 20220497. (2022).
8. Oughton, E., et al. Helios solar storm scenario. Cambridge Risk Framework series. (2016).
9. Liu, Y. D., et al. Observations of an extreme storm in interplanetary space caused by successive coronal mass ejections. Nature Communications, 5(1), 3481. (2014).
10. Lloyd's of London. Solar Storm Risk to the North American Electric Grid. (2013).
11. Lloyd's of London. Reimagining history: Counterfactual risk analysis. (2017).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
