The northern lights have been putting on a show. Across North America and Europe, skies have shimmered pink, violet and green - dazzling even the most jaded city dwellers. Social media is filled with photographs of suburban backyards glowing like scenes from a Scandinavian fairytale.
But beneath the beauty lies a threat that few outside the insurance and power industries are equipped to appreciate. These vivid auroras are the visible signatures of geomagnetic storms - disturbances caused by solar flares and coronal mass ejections that fling charged particles toward Earth. And while they make for ethereal selfies, they also induce powerful electric currents in the planet’s magnetic field. Those currents can quietly fry transformers, knock out satellites, and, in a severe event, black out entire continents.
Insurers, usually preoccupied with wind speed and wildfire risk, now find themselves watching the sun.
The Carrington Event of 1859 - the largest solar storm on record - set telegraph wires ablaze. In a digital, electrified world, the consequences would be exponentially greater. Lloyd’s of London has modeled scenarios in which a severe geomagnetic disturbance could inflict hundreds of billions of dollars in insured losses, mainly through long-duration power outages and equipment failure.
“A severe solar storm could cause global economic losses of up to $2.4 trillion over five years,” Lloyd’s said in a Press release earlier this year.
Unlike a hurricane, there’s nothing to board up or evacuate from. The damage begins invisibly, with geomagnetically induced currents coursing through high-voltage power lines. These surges can overheat transformer cores, destroying units that take a year or more to replace. Satellite operators can lose communications or navigation systems; airlines may have to reroute flights to avoid radiation spikes.
Each of these disruptions can cascade into the kinds of losses the industry dreads most: contingent business interruption. If a grid or telecoms provider goes dark, factories, hospitals and financial institutions may be unable to function — even if their own property remains unscathed.
Yet coverage for such events is murky. Many property and cyber policies exclude “electrical disturbance” or “power failure” unless it originates within the insured premises. That leaves a gray zone for what’s colloquially known as “space weather.”
Some carriers are responding. Lloyd’s syndicates, AXA XL, and Munich Re’s HSB unit have begun crafting bespoke or parametric products, paying out if geomagnetic indices exceed a set threshold. For space insurers, solar radiation is a known peril - they’ve been writing it for decades. But for terrestrial clients, it’s still experimental territory.
“There is no model to understand the type of losses that could be likely.” The BMS Group posted, but some companies are trying to provide the industry with some kind of threat analysis. Verisk’s Emerging Issues team has already started to track risks like… coronal mass ejections and solar flares.”
"The heightened solar activity… could leave the insurance industry facing a barrage of disruptive claims,” said Gallagher Specialty in a note last year.
Governments, too, are paying attention. The US and Canadian grid regulators have issued resilience standards requiring utilities to harden systems against solar storms. But implementation is uneven, and in much of the world, infrastructure remains dangerously exposed.
For now, the solar storms remain more photogenic than catastrophic. Power grids have weathered recent disturbances with only minor hiccups. Still, scientists warn that we are nearing the peak of Solar Cycle 25, a period of heightened activity expected to continue into 2026.
In the meantime, the aurora watchers keep gazing skyward — and risk managers keep running stress tests. The same celestial forces that paint the heavens could, without warning, darken everything below.
