From Vancouver to Halifax - and across much of Europe - night skies have been rippling with pinks, violets, and greens. The northern lights have dazzled onlookers from backyards and high-rises alike, flooding social media with images that look more like Nordic folklore than a spring evening in the suburbs.
But behind the spectacle lies a largely invisible hazard, one that only a handful of specialists in the power and insurance sectors fully grasp. Those luminous curtains of light are triggered by geomagnetic storms — eruptions from the sun that hurl charged particles toward Earth. The same solar flares responsible for the light show can also generate electric currents capable of burning out transformers, disabling satellites, and, in a worst-case scenario, plunging large regions into darkness.
Canadian insurers accustomed to tracking wildfire risk and flood models are now forced to study the sun.
The 1859 “Carrington Event” - the strongest recorded solar storm - famously set telegraph lines on fire. In a world wired for instant communication and electrified everything, the damage would be incalculably larger. Lloyd’s of London has explored scenarios in which a major solar storm could trigger hundreds of billions in insured losses through prolonged power failures and destroyed electrical infrastructure.
“A severe solar storm could cause global economic losses of up to US$2.4 trillion over five years,” Lloyd’s noted in a recent press release.
Unlike hurricanes or wildfires, there’s no physical warning to prepare for. The first blow comes invisibly, when geomagnetically induced currents race through long-distance transmission lines.
Those surges can overheat transformers - components that often take over a year to replace. Satellites can lose navigation or communications capability, and airlines may divert polar routes to avoid radiation spikes.
Each of those disruptions can spiral into one of the industry’s most complex exposures: contingent business interruption. A power or communications outage upstream can shutter hospitals, factories, or trading platforms far beyond the initial fault zone.
Coverage, however, is far from straightforward. Many property and cyber policies exclude “electrical disturbance” or “power failure” unless the damage originates on-site. That leaves a regulatory and contractual grey area around what’s now often called space weather.
Some carriers are testing solutions. Lloyd’s syndicates, AXA XL and Munich Re’s HSB division have been developing custom or parametric policies that pay out automatically when geomagnetic indices cross defined thresholds. Space insurers have long managed radiation risk for satellites; extending that approach to terrestrial exposures is still largely experimental.
“There is no model to understand the type of losses that could be likely,” BMS Group observed, though data firms are beginning to quantify the threat. Verisk’s Emerging Issues team, for instance, now monitors perils such as coronal mass ejections and solar flares.
“The heightened solar activity… could leave the insurance industry facing a barrage of disruptive claims,” Gallagher Specialty warned in a 2024 note.
Government agencies are also taking notice. In both Canada and the United States, grid operators are required to build resilience standards to shield infrastructure from solar storms. Compliance remains uneven, however, and experts caution that critical systems worldwide are still vulnerable.
For now, the phenomenon is more captivating than catastrophic. North American grids have withstood recent solar surges with limited disruption. Yet scientists warn that Solar Cycle 25 is approaching its peak, expected to last through 2026 - meaning the next major flare could arrive at any time.
While Canadians continue to marvel at the northern lights, actuaries and risk managers will be watching the same skies for different reasons. The aurora that delights the eye could, without warning, test the world’s infrastructure - and the insurance industry’s imagination.
