Risks Associated with Geomagnetic Storms

In May 2024, stargazers and smartphone photographers witnessed a spectacular moment in time over the course of two nights. Social media and news outlets were dazzled by incandescent light plays from around the world—magenta skies gleamed over the city of Vienna, rainbow hues illuminated a lighthouse in England, emerald displays lit up the lakes of Minnesota, and violet lights danced over palm trees in Mexico’s Yucatan Peninsula.

In Europe, North America, and China, onlookers were treated to a rare appearance by the Northern Lights in locations not usually visited by such displays, while the Southern Lights also staged a show in New Zealand. These spectacles were triggered by a severe geomagnetic storm, the like of which Earth has not seen for over 20 years.

Geomagnetic Disturbances

Geomagnetic storms are induced when the Sun belches out tons of searingly hot plasma gas, or solar wind, from its atmosphere in a “coronal mass ejection” (CME). CMEs are a difficult risk to plan for, but data suggests the probability of a storm exceeding a similar magnitude to the one seen in May 2024 will remain high in the next couple of years.

A typical CME can cross the 150 million kilometers between the Sun and Earth in one to five days. It can carry a billion tons of matter into the solar system, and, if it hits Earth, causes a shockwave that violently compresses the magnetic field and transfers energy into the magnetosphere. The impact largely depends on the orientation and strength of the magnetic fields carried by the CME, as well as the conditions inside Earth’s magnetosphere.

Such was the severity of the May storm—designated a G5, the highest level—that the U.S. scientific agency, the National Oceanic and Atmospheric Administration (NOAA), issued a rare warning about potential storm conditions. Fortunately, despite some reports of disruption to high-frequency radio and GPS navigation systems, the storm did not significantly impact local populations. With an even stronger storm, however, the outcome could have been very different.

Although they might not pose an immediate threat to life on Earth, intense geomagnetic storms could cause havoc with the technologies that modern life depends upon. Our Sun switches between calm and active phases, alternating every 11 years. We are now in an active phase, expected to peak in 2025.

While scientists say this is not a particularly active solar cycle, violent disruptions can occur at any time, and can be devastating when they do. A report from Bloomberg Intelligence warned that a major space storm could cost insurers even more than an event such as Hurricane Katrina ($55 billion in 2005, or $90 billion today), given its potential to disrupt radio communications, power grids, spacecraft, and satellite navigation.

The Carrington Event

A reference point for the potential impact of geomagnetic storms is the Carrington Event of 1859. That year, a large CME hit Earth’s magnetosphere and caused disruptions to telegraphs—the cutting-edge technology of the time—across Europe and North America. During the storm, excess currents were produced on telegraph lines, shocking technicians, and sometimes setting equipment on fire. The auroras produced were so bright it is claimed people as far south as Cuba and Hawaii could read newspapers at night by their light.

A small geomagnetic storm may disrupt pigeon races, but stronger events can paralyze power grids, disrupt satellites, silence short-wave radio stations, and confuse GPS equipment. For instance, a solar storm in 1989 interrupted electricity supply to six million people for nine hours in the Canadian province of Quebec. That was when the temperature was minus 15 degrees Celsius. The blackout wreaked havoc because it caused traffic guidance systems, airports, and district heating to shut down.

Our Wired World

Our world depends on millions of miles of wires to transport electricity and a complex grid of machines, like transformers, that make this transfer possible. How bad the effects of a powerful CME might prove to be is debatable. Some experts argue a big storm will have little impact. Others believe it will knock out power in various places. Still others predict little short of the end of days, with induced currents toppling electrical grids and impacting such integral aspects of modern life as computers and communications systems, navigation, environmental monitoring, and defense and scientific research equipment. Life becomes difficult if you can’t pump water, can’t pump fuel, and can’t access systems critical for survival.

Should a Carrington-like event strike, the ability to restore power in the aftermath depends on the availability of skilled engineers to assess and either reset, commission repairs, or replace damaged transformers. The U.S. runs on some 2,500 large and expensive distribution transformers. However, only 500 or so are built annually around the world. Lead times for a new transformer order is currently up to two years, and that is when cranes work, and trucks and locomotives can be fueled.

Sudden Impact

A severe geomagnetic storm in the right location could have significant consequences for the economy and, therefore, the insurance industry, although the event might be geographically contained and of limited duration. Nonetheless, the modern world’s reliance on technology and energy means the exposure from a large space weather event could be significant. In fact, a Carrington-like event could be an “extraordinary scenario” within realistic disaster scenarios.

Northern latitudes, particularly the U.S. and Canada, are at particular risk because of their position on the Canadian Shield—resistant rock geology that prevents currents flowing freely so they seek outlets along less-resistant power lines. In those regions, the power lines tend to be very long, which increases the vulnerability of transmission equipment.

Risks vary across regions, but northeast America is by far the most exposed. New York state is where the infrastructure is most vulnerable to such events while having a large concentration in insured values. Research conducted by the Cambridge Centre for Risk Studies examined the possible impacts of an extreme space weather event affecting Earth and found the total direct shock of the storm and its subsequent power-loss effects to value- added activities in the U.S. could total from $220 billion to $1.2 trillion (2016 costs) across scenario variants. This corresponded to a percentage loss of 1.4% to 8.1% of U.S. gross domestic product (GDP).

Scientists observing the Sun have from 15 hours to a few days to see a CME coming and provide a warning. And the engineers that keep our world running are well aware of the risks posed and can take remedial action.

There could be severe delays stretching to months in having systems back up and running. High-energy-dependent plants, power plants, and gridlines would be most exposed, but all business sectors with systems not specifically designed to handle such an event are at risk. This underscores the need for businesses to prepare for the impact of such an event, which should be integrated into a company’s overall risk assessment and preparation for large-scale disasters.

—Michael Bruch is global head of Advisory Services at Allianz Risk Consulting.