Super El Niño could reshape catastrophe risk pricing, insurers warn
As forecasts suggest a stronger El Niño may be forming, insurers are bracing for heightened volatility in global weather patterns, driving renewed scrutiny of catastrophe models and climate-linked underwriting risk
Insurers are beginning to reassess catastrophe exposure as forecasts point to a potentially unusually strong El Niño developing in the coming months, raising concerns over intensified global weather volatility and the adequacy of existing pricing models.
Often described as a “super El Niño” in worst-case scenarios, the climate pattern is driven by unusually warm sea surface temperatures in the equatorial Pacific and is associated with increased likelihood of extreme weather events worldwide, including heatwaves, drought, and heavy rainfall.
Industry sources suggest underwriters are preparing for a strong event that could significantly disrupt established risk assumptions, particularly in regions already exposed to climate stress.
“If we are too conservative that we consider only the worst case, our offer will not be compelling to our clients,” Sebastien Piguet of Descartes Underwriting told Bloomberg. “But if we ignore the signal, we might also make mistakes. The fact that the conditions might be unprecedented makes this work harder.”
El Niño events typically influence weather patterns across multiple continents simultaneously, creating correlated losses across property, agriculture, energy, and travel insurance lines. This systemic nature makes pricing particularly challenging, as losses are not confined to a single geography or peril.
Insurers are increasingly responding by reassessing catastrophe models and incorporating longer-term climate trends into underwriting assumptions. This reflects growing recognition that historical baselines may no longer fully capture the frequency or severity of extreme weather events.
A previous extreme El Niño in the 19th century had been linked to catastrophic global food shortages, highlighting the potential macroeconomic and humanitarian consequences of such events, though modern exposure and resilience differ significantly.
More recently, the 2023–24 El Niño cycle demonstrated how outcomes can diverge from expectations, with impacts varying widely across regions and complicating predictive modelling.
As a result, insurers are expected to continue refining pricing approaches that combine traditional climate indicators with updated methodologies that account for ongoing global warming and shifting ocean temperature baselines.