Insurers and Reinsurers Must Seriously Consider El Niño Risks
According to a new Moody's study, El Niño could significantly alter global disaster risk patterns in 2026. Insurance and reinsurance companies appear likely to need to reassess risks linked to drought, wildfire, storms, and agricultural production.
Kathmandu. El Niño is projected to significantly alter disaster risk across many regions in 2026. According to a new Moody's study, insurance and reinsurance companies will need to consider its impact across various risks.
This climate pattern involves changes in Pacific Ocean temperatures, trade winds, and atmospheric circulation. It can affect regional temperatures, rainfall, and storm activity globally. NOAA confirmed El Niño conditions in June, and the event has strengthened since then.
In Asia, El Niño can bring below-normal monsoon rainfall, increasing drought risk and affecting agricultural output, including rice and palm oil. Changes in wind patterns in the western North Pacific can also affect where and how fast storms form.
However, Moody's noted that the relationship between El Niño and storm intensity remains uncertain. In the United States, El Niño can increase the likelihood of storm-like conditions in parts of the southern region. Meanwhile, unusually warm Atlantic waters can make storms more likely to form and more dangerous.
In Australia, the risk picture is even more complex. However, this year Australia has been experiencing unusually high rainfall.
According to Moody's, previous El Niño events have been associated with high risks of drought, heatwaves, and wildfires. The report states:
- El Niño increases heat and dryness in Australia.
- It raises wildfire risk by more than 50 percent compared with non-El Niño years.
- At the same time, it reduces the risk of tropical cyclones.