El Niño in 2026 is expected to create significant shifts in catastrophe risk across several regions. A new study by Moody's says insurers and reinsurers need to account for its effects across multiple perils.
The climate pattern, which involves changes in Pacific Ocean temperatures, trade winds and atmospheric circulation, can influence regional temperatures, precipitation and storm activity around the world. NOAA confirmed El Niño conditions in June, with the event strengthening since then.
In Asia, El Niño is expected to contribute to drier-than-normal monsoon conditions, potentially increasing drought risks and affecting agricultural production, including rice and palm oil. Changes in Western North Pacific wind patterns can also influence where and how quickly typhoons form, although Moody’s noted that the relationship between El Niño and typhoon intensity remains uncertain. In the US, El Niño is expected to increase the likelihood of stormier conditions across parts of the southern region, while unusually warm Atlantic waters could still support rapid intensification if hurricanes develop.
Australia presents a more complex risk picture. While the country is experiencing unusually wet conditions this year, Moody’s noted that past El Niño events have been associated with drought, heatwaves and elevated bushfire risk. The report said El Niño tends to increase heat and dryness in Australia, raising bushfire risk by more than 50% compared with non-El Niño years, while simultaneously reducing tropical cyclone risk. Moody’s warned that a shift from very wet to very dry conditions could increase the availability of fuel for major bushfires when combined with hotter-than-normal temperatures.
For insurers and reinsurers, Moody’s said the interconnected nature of El Niño-driven risks makes it important to consider multiple perils when assessing portfolios. The same climate pattern can increase one type of catastrophe risk while reducing another, meaning models focused on individual perils may not fully capture the overall impact. Moody’s said its catastrophe models incorporate the interactions between wildfire, tropical cyclone, flood and wind risks, while climate-conditioned models account for the latest research on how a warming climate could affect the frequency, intensity and impacts of future El Niño events.