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El Niño set to intensify as reinsurance pricing hits multi-year lows
Property catastrophe reinsurance rates fell 16% at the July 2026 midyear renewal after five straight quarters of below-average losses, raising questions about pricing adequacy ahead of a potentially record-warm year.
Reinsurance pricing has slid to multi-year lows as the UK Met Office signals a record-intensity El Niño developing, a shift that could extend loss pressures beyond a typical weather season. Insurance Business said the Met Office described the event as without precedent in its forecasts, with Pacific sea surface temperatures already more than 2°C above the long-term average and models projecting anomalies above 3°C later in 2026. According to the report, Met Office messaging carried by the BBC suggests 2027 is very likely to replace 2024 as the hottest year on record globally. The mechanism is that heat stored in the ocean is released into the atmosphere after an El Niño peak, creating a potential test for underwriters and reinsurers on whether current pricing adequately reflects the risk environment. The article notes that El Niño conditions can suppress Atlantic hurricane activity, which reinsurers have previously cited as a tailwind to pricing. At the same time, it points to increased cyclone activity in the Pacific basin, a below-average monsoon already affecting South Asia, and drought probabilities above 50% flagged by the World Meteorological Organization for parts of India, Southeast Asia, and the Horn of Africa. For property and agriculture risk, Insurance Business highlighted that pricing pressure has been driven by below-average losses, with property catastrophe reinsurance rates down 16% at the July 2026 midyear renewal, following a 12% decline at the January 2026 renewal. It also points to agricultural underwriting risks in Asia-Pacific and emerging markets arriving on top of already stressed soils, and cites WTW climate risk head Torolf Hamm on the limits of models built primarily around property aggregation rather than how disruption moves through interconnected supply chains.