The biggest risk from a potential super El Niño may not be the weather itself, but the assumptions insurers and businesses make about how disruption spreads once it arrives.
That's the view of Torolf Hamm (pictured), managing director and global head of physical risks in WTW's climate practice, who argues today's risk models remain highly effective at measuring direct physical damage but struggle to capture how disruption ripples through interconnected supply chains.
His comments follow a warning from TT Club, the London-headquartered mutual insurer for transport and logistics operators, that organisations should prepare now for a potentially severe El Niño rather than wait for disruption to unfold.
"The question is not whether disruption will occur, but how prepared organisations are to anticipate and respond to it," said Neil Dalus, the insurer's risk assessment manager.
The US National Oceanic and Atmospheric Administration's Climate Prediction Center confirmed on June 11 that El Niño conditions had returned, putting a 63% probability on the event reaching very strong intensity. By July 9, that probability had risen to 81% for the October–December 2026 period, with NOAA forecasters saying the event could rank among the strongest since records began in 1950. The forecast has already raised concerns about potential impacts on an already loss-making UK home insurance market.
Hamm argues the challenge extends beyond whether El Niño Southern Oscillation (ENSO) signals are incorporated into catastrophe models. The models themselves, he said, were built to aggregate individual property exposures into portfolios rather than reflect how disruption moves through today's interconnected economy.
"That is not how the world works anymore," Hamm said. "We are looking at value chains and interconnectivities between suppliers, your own operations, how your customers behave, and it's an interconnected world."
He said the models remain reliable for estimating direct property damage but become less effective once losses begin to cascade through suppliers, logistics networks and customers.
"Direct damage to assets is still okay, but when we're going into operational disruptions or wider disruptions, then the models start to break down," he said.
Hamm also questioned whether catastrophe models can reinforce, rather than correct, market expectations.
"You've got a bad event, new cat models get developed, and it's sort of playing back to the market what the market already to some degree expects," he said.
The challenge is not just technical. The Bank of England's assessment of general insurance protection gaps published earlier this year identified natural catastrophe risk as an area where insurance capacity continues to lag underlying exposure, underlining the challenge of pricing increasingly complex climate risks.
Asked where those weaknesses are most likely to emerge, Hamm pointed to food and agriculture, where regional dependencies on water, infrastructure and transport can quickly turn a distant weather event into a local supply shock.
"It's actually quite often hidden," he said, adding that the current pattern is expected to bring more flooding along the US west coast, a quieter Atlantic hurricane season and increased tropical cyclone activity across the Pacific.
For Hamm, the warning should be treated as a business continuity exercise rather than simply another weather forecast. He urged organisations to engage with key suppliers, understand where critical dependencies exist and examine how previous El Niño events affected their operations.
"Speak to them, try to understand how your value chain might be impacted and how exposed are your suppliers, how exposed are yourself," he said.
He also encouraged businesses to learn from previous events rather than start from scratch.
"Start to look into what happened in terms of historic events, then check whether you're in regions, whether you are exposed, and make sure you're preparing yourself for potential shocks."
As climate risks become increasingly intertwined with trade, infrastructure and global manufacturing, Hamm believes the industry's challenge is no longer simply forecasting where the next catastrophe will occur, but understanding how disruption travels once it does.
For insurers and brokers alike, that means the biggest modelling gap may no longer be predicting the weather, but pricing the interconnected consequences that follow.
