The world is officially in an El Niño climate pattern, and the trajectory is pointing toward one of the strongest events on record. NOAA's Climate Prediction Center has confirmed El Niño conditions are present and will strengthen through year-end, with a 97% chance of persisting through early spring 2027.
The European Commission's Joint Research Centre has described the outlook as "potentially historic," warning of a very high likelihood of the event being very strong and potentially unprecedented based on June 2026 seasonal forecasts, with climate impacts expected to persist across 2026 and 2027 even after the event peaks.
TT Club is calling on supply chain operators worldwide to review their risk management and resilience strategies in response, framing the risk as systemic rather than meteorological. A super El Niño is not simply a weather event but a risk multiplier with the potential to compound existing vulnerabilities across transport networks, energy systems and commodity markets, and for insurers, the cross-line exposure it creates is arriving at a moment when pricing discipline in the US commercial market is already under pressure.
The US insurance market faces a mixed and unevenly priced exposure. El Niño's tendency to increase Atlantic wind shear typically suppresses hurricane activity, and Colorado State University is calling for a below-average 2026 Atlantic season, which US catastrophe underwriters have broadly welcomed. But the reduced hurricane premium is arriving as US composite commercial rates fell 8% in Q1 2026, and Swiss Re projects insured catastrophe losses could reach US$148 billion in 2026 if long-term trends hold, limiting how much the hurricane suppression actually improves the aggregate underwriting picture.
The more specific pressure points are in lines where El Niño's consequences are less well-priced. Private flood direct premiums written in the US fell from US$803 million in 2023 to US$730 million in 2024, according to NAIC data, even as a record-strength El Niño raises flood exposure specifically in California and Arizona, states already stressed by years of wildfire losses and carrier withdrawals from the homeowners market. Falling take-up of private flood cover against rising El Niño flood exposure is the sharpest single pricing mismatch the event creates for US carriers.
Crop insurers face a related challenge. A strong El Niño introduces basis risk between what USDA models expect and what actually happens to commodity prices and yields when Pacific warming disrupts planting conditions across multiple growing regions simultaneously. ENSO effects are not yet integrated into standard catastrophe models, leaving a gap in accumulation management that cuts across property, agriculture and marine cargo lines at exactly the moment softening commercial rates are reducing the pricing buffer available to absorb unexpected losses.
That insurance market pressure is reinforced by supply chain disruptions already unfolding. The Panama Canal Authority has tightened draft restrictions for vessels transiting its Neopanamax locks, reducing the maximum authorised draft from 15.09 metres to 14.94 metres from July 24 and to 14.78 metres from August 15, as forecasts suggest a strengthening El Niño could reduce rainfall across the canal watershed. The canal endured a throughput reduction of as much as 40% during the 2023-2024 El Niño event, the precedent that gives the current restrictions their specific commercial weight.
Beyond the canal, TT Club identified transport and logistics disruption from intensified Pacific storm activity, energy demand surges from extreme heat with potential compounding effects on power generation and supply, and second and third-order effects including supplier disruption, freight cost increases, energy market volatility and working-capital pressures.
Neil Dalus, risk assessment manager at TT Club, said the trajectory of the event demands a proactive rather than reactive approach. "Those with greater supply chain visibility, diversified sourcing strategies and robust crisis management frameworks will be far better positioned to weather what could be a very challenging period," he said.
TT Club is encouraging organisations to pursue enhanced scenario planning that incorporates compound climate and geopolitical risks, supply chain diversification away from highly exposed geographies, deeper supplier mapping to identify hidden vulnerabilities, and the integration of seasonal climate intelligence into operational decision-making, steps that apply equally to supply chain operators managing physical exposure and to insurers managing accumulation across lines that El Niño affects simultaneously.
