Already this year, floods in the Midwest have delayed planting season and an Oklahoma tornado has caused two dozen deaths and billions of dollars in property damage. And according to the National Oceanic and Atmospheric Administration (NOAA), this is just the beginning. Predictive models suggest that this year’s hurricane season (which officially runs from June 1 through November 30) will be either “active” or “extremely active,” which could mean some serious property damage and business interruption incidents for business owners in storms’ paths.
The reasons cited for the surge of storm activity are diverse and include…
- Ongoing influence from an African monsoon weather pattern that has been influencing global climate since 1995.
- Higher-than-average water temperatures in both the Caribbean and Atlantic oceans.
- A lack of the weather formation known as El Nino, which, when active, suppresses hurricane development.
As we saw from Hurricane Sandy last fall, a single weather event can cause widespread devastation for individuals and business owners, leaving the uninsured with few choices for recovering.
But even if you’ve purchased adequate flood insurance for your business, weather in the coming years could throw a wrench in your well-laid plans.
The New Storm on the Block
A report issued by Lloyd’s of London this year, “Solar Storm Risk to the North American Electric Grid,” highlights the potential for costly business damage from a threat that most business owners haven’t even considered: solar storms.
Geomagnetic storms, which occur on the sun and include solar surges, have the potential to disrupt power grids on earth, particularly in North America in the coming months. While solar storms (especially those of the magnitude necessary to disrupt electric grids) are rare events, 2013 marks a year of peak solar activity, which, according to the report, increases the odds of an event.
So what would disruption from a solar storm mean for Earthlings? Based on past events (some of which occurred before widespread adoption of electricity), fallout could include…
- Blackouts in certain geographic areas. A smallish 2003 storm affected power suppliers in both Sweden and South Africa, leading to relatively short blackouts.
- Widespread power outages. In 1989, a larger solar storm caused nine hours of blackout in Quebec, an event that affected six million people.
- Massive, long-term electricity loss. The report notably predicted that a major solar storm that affects North America could cause outages that last as long as two years for as many as 40 million people. Obviously, the economic fallout from an event of that magnitude would be significant.
Can You Protect Your Business from Solar Storms?
In theory, your Business Interruption Insurance could protect you against a storm that cut power to your business (assuming the storm was included a “covered peril” on your insurance policy). But in the event of a massive, long-term blackout, the sheer number of Business Interruption claims could leave insurance providers unable to compensate clients.
Perhaps more to the point, though, if you’re without power for two years, you’ll have bigger problems than trying to receive a payout from your insurer.
All in all, the threat from solar storms is not significant enough to spend much time worrying about. For greater peace of mind, you may want to bring up solar storm coverage in the next conversation you have with your insurance agent to determine whether you’ll be covered in the event of a minor outage.