A solar storm that could knock out power grids and computers is more probable than we think, according to Lloyd’s Australia General Representative Chris Mackinnon.

Insurers must have adequate capital for risks that may be considered very unlikely but would have devastating consequences for the global economy, he told last week’s Claims Convention in Sydney.

Such threats include solar storms, terrorism and cyber attacks.

Mr Mackinnon outlined property damage, business and supply chain interruption, professional indemnity and management liability issues.

He says global interconnectedness via technology has amplified the risks.

“Emerging risk goes well beyond cyber, drones and autonomous vehicles.”

He says a major solar storm is a one-in-150-year event so must be considered by insurers required to hold adequate capital for one-in-200-year events.

Solar cycle activity peaks every 11 years and the current peak is this year.

Solar storms release energy that disrupts the Earth’s magnetic field, causing significant current surges in power lines and failure of solar panels, electronic chips, hardware and software.

A solar storm knocked out a power grid in Quebec in 1989, affecting 6 million people.

“The estimated economic cost of this event was $C13.2 billion ($13.54 billion), for a nine-hour interruption,” Mr Mackinnon said. “While seemingly the stuff of science fiction, these solar storms are real and they post a real threat.”

Next month Lloyd’s will release a new city risk index, showing the potential impact of 18 threats on the projected 10-year economic outputs of 301 major cities.

Mr Mackinnon says Sydney is most at risk from man-made threats such as a market crash or cyber attack.

The Claims Convention was held by the Australasian Institute of Chartered Loss Adjusters and the Australian and New Zealand Institute of Insurance and Finance.