TT Club is calling on supply chain operators worldwide to review their risk management and resilience strategies as forecasts point to a growing chance that the current El Niño event could intensify into one of the strongest on record.
The world is now officially in an El Niño climate pattern.
NOAA's Climate Prediction Center confirmed in its most recent diagnostic discussion that El Niño conditions are present and will strengthen through the end of the year, with a 97% chance of persisting through early spring 2027.
The European Commission's Joint Research Centre has gone further, describing the outlook as "potentially historic" and warning that the event has a very high likelihood of being very strong and even turning into an unprecedented event, based on June 2026 seasonal climate forecasts.
The JRC's analysis suggests climate impacts will be felt across 2026 and 2027 in many regions of the world and may persist even after the event itself has peaked.
TT Club is urging organizations to recognize that a super El Niño is not simply a weather event, but a systemic risk multiplier with the potential to compound existing vulnerabilities across global supply chains. The convergence of climate disruption with ongoing geopolitical pressures creates conditions for cascading, interconnected challenges across transport networks, energy systems and commodity markets.
That warning is already playing out at one of the world's most critical trade arteries.
The Panama Canal Authority has tightened draft restrictions for vessels transiting its Neopanamax locks amid forecasts that a strengthening El Niño could reduce rainfall across the canal watershed, lowering the maximum authorized draft in stages from 15.09 meters to 14.94 meters from July 24 and to 14.78 meters from August 15.
The canal, which carries a significant share of global maritime trade, endured a similar drought-driven throughput reduction of as much as 40% during the 2023 to 2024 El Niño event, underlining how quickly water-dependent transit routes can become a bottleneck.
TT Club identified transport and logistics disruption as a key area of concern, with reduced water levels in critical transit routes such as the Panama Canal, alongside intensified Pacific storm activity, threatening to further erode the reliability of global shipping networks.
On the energy side, extreme heat may drive surges in demand with potential compounding effects on power generation and supply, potentially leading to power rationing and operational disruption in manufacturing hubs.
Beyond these direct impacts, organizations may face second and third-order effects through supplier disruption, freight cost increases, energy market volatility and working-capital pressures.
The event carries particular implications for the US insurance market. 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.
However, Swiss Re projects insured catastrophe losses could reach $148 billion in 2026 if long-term trends hold, and the reduced hurricane premium is arriving as US composite commercial rates fell 8% in Q1 2026, complicating repricing for carriers.
California's insured loss exposure, already stressed after years of wildfire losses and carrier withdrawals from the homeowners market, faces a different but equally severe test from major flood and atmospheric river events under a record-strength El Niño. That risk lands awkwardly against falling take-up of private flood cover. NAIC data showed private flood direct premiums written fell from $803 million in 2023 to $730 million in 2024, even as El Niño raises flood exposure specifically in California and Arizona.
US crop insurers face a related pricing challenge, since 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, and ENSO effects are not yet integrated into standard catastrophe models.
That gap in accumulation management, combined with a softening commercial market, leaves US carriers navigating a peril that cuts across property, agriculture and marine cargo lines at a moment when pricing discipline is already under pressure.
Neil Dalus (pictured), risk assessment manager at TT Club, commented: "The trajectory of this El Niño event demands that the logistics and supply chain community takes 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."
TT Club is encouraging organizations to take priority actions, including 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 decision-making processes.
