When Australia's Bureau of Meteorology (BOM) declared on Tuesday that El Niño had officially arrived in the tropical Pacific, the announcement landed in a UK market already under significant pressure. Home insurers are heading for a combined ratio above 100%. Commercial property rates fell 10% in the first quarter. The ABI recorded a record £6.1 billion in property claims payouts in 2025. Against that backdrop, the BOM's warning that this event could intensify into one of the strongest in seven decades is not merely a southern hemisphere weather story.
"Forecasts are pointing towards a strong to very strong El Niño event, based on the extent of warming in the central tropical Pacific," the bureau said. "Around half of the models indicate this event could peak at levels among the highest observed since 1950."
The BOM's seasonal model, ACCESS-S, is projecting peak warming in excess of 3°C above the long-run average in the Pacific's Niño3.4 monitoring zone – which would be a post-1900 record, comfortably above the previous high of 2.65°C set in November 1902. The rate of warming in that zone is already the fastest recorded since 1943, according to ABC News meteorologist Tom Saunders. Since most El Niño events do not peak until November to January, an event emerging as early as June will have around six months to intensify further.
KEY FIGURES
The most immediate UK-specific exposure is one the market is already wrestling with: subsidence. El Niño is associated with hotter, drier conditions across parts of Europe, and the UK property sector has spent the past three years recalibrating to a world in which extreme summer heat is no longer an outlier.
Zurich UK chief claims officer James Nicholson made the point starkly in May, when temperatures hit 34°C and 35°C on consecutive days. "Heat is no longer an outlier, it's becoming part of the baseline risk profile in the UK," Nicholson said. The context behind that statement is sobering. ABI data shows subsidence payouts following the 2022 heatwave reached £219 million. By 2025 – the UK's hottest year on record – that figure had risen to a record £307 million. PwC has estimated total subsidence-related insurance costs could reach £1.9 billion by 2030 if extreme heat events continue to increase in frequency and severity.
Steven Coxon, head of subsidence at Claims Consortium Group, said conditions at the start of 2026 were already tracking the 2025 surge year closely. "Since 2018 we have had three surge events (2018, 2022 and 2025)," he said, "and based on current MORECS data there is the potential for us to see yet another surge event this year." A prolonged El Niño-driven summer heat and drought across the UK and Europe would add further momentum to that trajectory.
£307m
UK subsidence payouts in 2025 – a record, up from £219m following the 2022 heatwave
Source: ABI
The pressure is compounding. Deloitte has forecast that home insurers will swing to a net loss in 2026, with the combined ratio expected to reach 102.1%. Storm damage to homes rose 32% in 2025 to £244 million; domestic flood claims jumped 38% to £312 million; and premiums are forecast to fall a further 7% this year. An El Niño-amplified summer heat event would add another surge layer to a book that is already heading into the red.
Beyond domestic property, the London market faces a broader reshuffling of catastrophe exposures. Guy Carpenter warned in April that El Niño conditions were already beginning to redraw the catastrophe map for global re/insurers, with flood and wildfire exposures redistributing across geographies as Pacific sea surface temperatures shifted. The broker pointed to past analogs – including catastrophic flooding in California and Peru during 1997–98, and drought-driven wildfires in Indonesia in both 1997–98 and 2015–16 – and advised carriers to treat the current cycle as a driver of portfolio reshaping, reassessing geographic concentrations and peak peril assumptions before the second half of the year.
Phil Klotzbach, senior research scientist at Colorado State University, described current conditions as pointing toward "a moderate to strong El Niño for the peak of hurricane season." That suppresses Atlantic activity through increased wind shear – current forecasts project a below-normal 2026 Atlantic season, welcome news for London syndicates with US wind exposure. But Inigo Insurance's catastrophe research team, writing last week, cautioned against complacency. The event is "emerging against a backdrop of global warming, which, when combined, will likely make 2026 and/or 2027 the warmest years on record and amplify global hydroclimate extremes." The intensity ceiling for any storms that do form remains elevated regardless of basin-wide statistics.
Lockton's global risk analysts described the phenomenon as "a global risk redistribution mechanism" rather than a simple cyclical weather event, warning that if multiple perils – flood, wildfire and agriculture – were to trigger simultaneously in the second half of the year, the resulting reinsurance dynamics could tighten capacity and push costs higher at precisely the moment the market has grown accustomed to favourable conditions.
As Insurance Business UK reported last week, the El Niño declaration coincides with growing alarm about what scientists call "temperature whiplash" – the increasingly abrupt transition between weather extremes. In May, western Europe moved from a cold spell to an intense heatwave in just ten days. Spain recorded its highest heat-related death toll for May since monitoring began. The issue, as Samantha Burgess of the European Centre for Medium-Range Weather Forecasts put it, is not simply that extremes are becoming more severe but that they are becoming "the new normal rather than the exception."
The insurance industry has become increasingly sophisticated at modelling event frequency. What it has spent far less time modelling is volatility itself – how rapidly conditions move from one extreme to another and whether existing coverages respond adequately to that speed. As one analysis in the Insurance Business UK piece summarised it: "The insurance industry has become increasingly sophisticated at modelling frequency. The next challenge may be modelling volatility itself."
The ENSO signal is not yet integrated into standard catastrophe models. Speaking to Insurance Business last year, Sharp of ICAT noted: "We know ENSO impacts tropical cyclone activity in both the Atlantic and Pacific Oceans. While its effects aren't yet integrated into current catastrophe models, that's likely to evolve." For Lloyd's syndicates and London market carriers, that evolution may now need to accelerate.
The commercial context makes the El Niño declaration harder to absorb. UK composite commercial rates fell 8% in the first quarter of 2026, with property down 10%, according to Marsh's Global Insurance Market Index. Howden's January renewal data showed that the UK recorded the largest rate reductions of any country for global property catastrophe reinsurance. Gallagher Re reported record-breaking levels of capital underpinning the reinsurance market at the start of the year, with a traditional capital base of $710 billion.
That benign backdrop was built on a 2025 that proved unusually quiet at the global catastrophe level. A Super El Niño that generates meaningful losses in a peak-zone territory – the United States, Europe or Japan – would test whether that capital remains patient. Kevin Dedieu, chief scientific officer of Descartes Underwriting, which recently became a Lloyd's coverholder through Oak Global's Syndicate 2843, offered a measured assessment: "The peak is still uncertain, and no major event has happened yet, so capacity remains unaffected. A super El Niño would increase the probability of certain extreme events occurring, but other local factors would have to come into play for one to materialise."
His caveat is important. But so is the context in which it sits. The Chatham House think-tank warned last month that a Super El Niño could expose fundamental gaps in UK preparedness, noting that France has already made climate risk integration mandatory under legislation requiring institutional investors and asset managers to report climate-related risks. The UK has no equivalent obligation.
Perhaps the most diffuse but persistent channel through which El Niño reaches UK insurance is via the food supply chain and business interruption books. Australia – one of the world's largest exporters of wheat, sugar and beef – is particularly exposed to El Niño-driven drought. The BOM noted that the 2023–24 El Niño produced the driest three-month period on record in parts of the country. The 2015–16 event, one of the strongest, brought widespread drought and reduced grain and oilseed output across the Asia-Pacific.
UK food supply chains are already under extraordinary pressure from energy and logistics costs linked to the Middle East conflict. The Food and Drink Federation has revised its UK food inflation forecast to over 9% by the end of 2026. An El Niño-driven harvest failure in wheat, sugar or soy-producing regions would add a further inflationary impulse on top of an already stressed system – with direct consequences for trade credit underwriters, business interruption books and any insurer with exposure to the food processing or retail sectors. The ECIU analysis published last month estimated UK food prices are on track to be 50% higher by November 2026 than they were at the start of the cost-of-living crisis in mid-2021.
The profession has had advance warning. 2026 is on track to be the seventh consecutive year with either El Niño or La Niña conditions – when historically around 50% of years see a neutral Pacific. The last comparable run was 1969 to 1976. The market is not facing a one-off weather anomaly. It is confronting the possibility that the baseline for global climate risk has fundamentally shifted, at a moment when UK domestic books are already stressed, rates are softening and the modelling infrastructure has not kept pace.
