Insurance-linked securities: hurricane season outlook 2026
Overall storm activity is expected to be close to normal, but evolving regional patterns may influence the distribution and severity of US landfalls.
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Drivers of seasonal hurricane risk
For ILS managers, Atlantic hurricane risk deserves close seasonal attention because it is a key peak peril and much of that exposure is concentrated in the June to November hurricane season, when hurricane-linked positions are most “on-risk” and earn their associated risk premia. While seasonal forecasts are inherently uncertain, large-scale climate signals provide some value to reposition the portfolio ahead of the season.
The El Niño Southern Oscillation (ENSO) is the dominant driver of year-to-year variability in Atlantic hurricane activity. ENSO describes the irregular fluctuation of sea surface temperature (SST) and atmospheric pressure across the equatorial Pacific Ocean, cycling between warm (El Niño), cool (La Niña), and neutral phases. The phenomenon is primarily monitored using SST anomalies in the so-called Niño 3.4 region, a critical zone in the central equatorial Pacific. Broadly speaking, El Niño tends to suppress Atlantic hurricane activity, while La Niña tends to support it. However, not all El Niño events are created equal. A more eastern-Pacific (canonical) El Niño typically produces a stronger suppressive signal for Atlantic hurricanes, whereas a more central-Pacific (Modoki) event can lead to a weaker Atlantic response and, in some cases, relatively greater US landfall risk than a canonical El Niño. Therefore, it is important to consider the full SST pattern to assess its impact on hurricane risk.
Another, equally important, driver of Atlantic hurricane activity is SST in the Main Development Region (MDR), defined as the tropical North Atlantic extending from the west coast of Africa to Central America. Warmer MDR SSTs provide the fuel necessary for hurricane genesis and intensification, particularly during the peak August–October period.
Oceanic conditions and Atlantic basin activity
The Pacific is currently in a decaying La Niña state moving towards neutral conditions with a 90% chance of El Niño conditions during the peak hurricane season in August-October (ref). Early El Niño forecasts face the so-called spring predictability barrier, a period when atmospheric noise might overwhelm the oceanic ENSO signal and forecast uncertainty is high. However, the large, well-structured pool of subsurface heat in the tropical Pacific , and good model agreement give higher than usual confidence in an early EL Niño forecast. Nevertheless, the ultimate strength and character of the 2026 ENSO remain uncertain until atmosphere-ocean coupling strengthens post-May. We currently estimate that a moderate to strong El Niño is most likely during the peak of the hurricane season, with Nino 3.4 anomalies in the range of 1.25 to 1.75°C. Note that the full range of forecasts is much wider (Figure 1).
The North Atlantic is significantly cooler than in 2024 and somewhat cooler than 2025, but still warmer than climatology defined as the 1991-2020 average. We expect MDR SST anomalies around 0.20 to 0.40°C with somewhat more elevated warmth in the Gulf of Mexico (0.40 to 0.70°C) and along parts of the US East Coast (Figure 2 background map).
The interplay between developing El Niño conditions and elevated Atlantic SSTs creates a mixed signal for basin-wide activity. Most basin activity forecasts indicating a normal to slightly lower number of tropical storms and hurricanes compared to the 1991-2020 average. Using a climate-conditioned hurricane model , we translate this to an estimate of the average number of hurricane landfall per year (Figure 1). Given the current uncertainty in climate conditions, the hurricane landfall forecast is close the 1991-2020 average of 1.9.
Figure 1. Simulated average annual hurricane landfalls for different Sea Surface Temperatures (SST) in the Atlantic main development region (MDR), and the Niño 3.4 region used as indicator for the El Niño Southern Oscillation (ENSO) cycle. Points show best estimate for 2026 peak season conditions, error bars indicate 90% forecast range. Landfalls for CONUS (contiguous United States) only. Data sources: Reask, IRI, ECMWF.
Regional landfall activity
For an ILS portfolio, the regional landfall pattern matters more than basin-wide landfalls. At Schroders Capital ILS, we constantly monitor regional seasonal activity using public and commercial data sets and tools . The most granular data we use is a bespoke data set developed by Reask which translates the seasonal climate forecasts from the European Centre for Medium Range Weather Forecasts (ECMWF) into climate-aware stochastic track sets. Instead of looking at simple indicators for e.g. El Niño strength and type (canonical vs. Modoki), it makes full use of dynamical global climate model forecasts. Figure 2 shows the regional landfall frequency changes between the 1991-2020 baseline and the 2026 seasonal forecast issued in mid-April.
The forecast indicates the Gulf and Caribbean will be quieter than usual, consistent with the canonical El Niño suppression footprint due to higher vertical wind shear. Conversely, the north- and southeast face elevated risk, as warm SSTs extending into the western Atlantic, support storm maintenance and potential intensification (Figure 2).
An El Niño-like environment may reduce activity in parts of the Atlantic basin, but it does not remove the risk of high-impact landfalls. While we expect to see fewer storms overall, the ones that do form still have the potential to rapidly intensify if they hit areas of elevated SST. Consequently, while the forecast of hurricane landfalls for Florida is slightly down from climatology, the forecast for major hurricane landfalls is up. For the South- and Northeast, the picture is even clearer with major hurricane landfalls predicted to increase more than all hurricane landfalls on a relative basis.
Figure 2. Hurricane frequency ratio between 2026 seasonal forecast and 1991-2020 climatology for coastal states grouped into Gulf, Florida, South- and Northeast. Background map shows Sea Surface Temperature (SST) anomaly. Data sources: Reask, ECMWF.
Implications for loss
What is even more important for ILS portfolio management than regional landfall activity, are change in simulated losses. So, how do the forecasted seasonal landfall frequency changes affect reinsurance risk? To illustrate this, we modelled the expected loss (EL) for nationwide and regional industry loss warranties (ILW). We adjust the regional landfall rates from a traditional vendor model for each hurricane category to match Reask’s detailed, climate-aware forecast. The adjusted loss distribution is then applied to ILWs with binary triggers at different levels (Figure 3).
For the whole contiguous US (CONUS), the EL change is mostly flat compared to the 1991-2020 baseline, with a moderate increase towards higher market losses. This is driven by the warm SST, which support a slight increase in major hurricane landfalls. The same holds true for Florida, where we observe a slight reduction for small market losses (more frequent events) due to fewer overall hurricane landfalls, but an increase at high market losses (rarer events) due to slightly more major hurricane landfalls. In the Gulf, we see a clear reduction in EL, caused by a forecasted reduction in both all and major hurricanes, while the opposite is true in the South- and Northeast.
These fully stochastic, regional loss changes allow us to reposition the portfolio in terms of regional exposure and structure of the risk transfer agreements like attachment points or franchise deductibles.
Figure 3. Simulated impact on regional Industry Loss Warranties (ILW) expressed as expected loss (EL) ratio between 2026 seasonal forecast and 1991-2020 baseline for different market losses. For clarity, changes only shown for market loss events more frequent than approx. 1-in-100.
Conclusion
The early outlook for the 2026 hurricane season remains mixed but already provides a useful signal. A canonical El Niño event is likely to occur during the peak season, although its actual strength and pattern are still uncertain. At the same time, the Atlantic main development region is still warmer than climatology and even more so in the Gulf and along the east coast. This means that while an El Niño typically suppresses activity in the Caribbean and the Gulf through increased shear, and we consequently expect fewer total storms, the systems that do form may intensify to major hurricanes, especially if they cross warm waters before landfall.
For ILS portfolios, the more important message is regional rather than basin-wide. Current signals point to lower activity and losses in the Gulf, but relatively higher risk in the South- and Northeast, especially for stronger events. This creates scope for portfolio repositioning ahead of the season and for tactical trading as conditions evolve.
While springtime forecasts are notoriously uncertain, the current thermal structure of the tropical Pacific and the widespread model agreement give higher than usual confidence in this early forecast. In short, while seasonal hurricane forecasts are uncertain, using state of the art tool and the latest science allows to translate them into actionable investment insights.
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