This paper (here), published in Nature Communications (DOI: 10.1038/s41467-025-54619-0), revisits (yet again) the potential for drastic changes in the El Niño-Southern Oscillation (ENSO) under greenhouse warming using the high-resolution AWI-CM31 climate model under the high-emission SSP5-8.5 scenario. The authors (Stuecker et al., 2025) analyse ensemble simulations from 2015–2100, comparing them to observations, a 1950 control run, and 49 CMIP62 models.
The core finding is a projected regime shift in ENSO dynamics by mid-21st century (~2050–2060), crossing a noise-induced Hopf bifurcation, importantly, toward “supercriticality.” This results in:
- Increased ENSO amplitude: Sea surface temperature (SST) variance in the equatorial Pacific rises by ~50–100%, peaking in boreal winter, driven by reduced thermocline damping, enhanced Bjerknes feedback (e.g., stronger Ekman upwelling), and amplified atmospheric noise (e.g., intra-seasonal variability).
- Greater regularity: ENSO shifts from irregular to cyclic behavior with periodicities of 2–5 years, seasonally locked to boreal summer growth and winter peaks. Sample entropy metrics show decreasing irregularity, akin to observations but amplified beyond internal variability.
- Global mode resonance: ENSO synchronizes with other climate modes, boosting their amplitudes by 20–75%:
- North Atlantic Oscillation (NAO): +20%, stronger negative correlation with ENSO, leading to amplified European winter variability.
- Indian Ocean Dipole (IOD), Indian Ocean Basin (IOB), Tropical North Atlantic (TNA), and North Pacific Meridional Mode (NPMM): Enhanced inter-annual peaks and phase-locking to ENSO frequencies, including near-annual “combination tones.”
Mechanisms include widening ENSO wind stress patterns (consistent with CMIP6 trends), reduced damping rates, and reorganized atmospheric mean flows (e.g., extended Pacific jet). While AWI-CM3 shows extreme changes, ~55% of CMIP6 models project increased ENSO regularity and ~82% increased amplitude, with a few (e.g., E3SM-1-13, EC-Earth34) mirroring AWI-CM3.
Relevance and Impacts for the Insurance Industry
ENSO drives global weather extremes, influencing floods, droughts, heatwaves, and storms, which account for ~70% of insured losses worldwide (e.g., via agriculture, property, and business interruption). This study’s projections amplify risks under high emissions, with direct implications for actuarial modeling, premiums, and reinsurance:
- Heightened Extreme Event Frequency and Intensity: Stronger, more regular ENSO could exacerbate “whiplash” effects—rapid shifts between El Niño (wet/warm) and La Niña (dry/cold)—amplifying hydroclimate impacts. For instance, enhanced ENSO-NAO coupling predicts wetter Iberian winters during El Niño, increasing flood risks in Europe, while Pacific amplification could worsen California droughts/floods and Australian bushfires. Global mode synchronisation may compound events, e.g., simultaneous IOD-ENSO extremes intensifying Indian Ocean cyclones or TNA-linked Atlantic hurricanes.
- Predictability vs. Severity Trade-Off: Increased ENSO regularity could improve seasonal forecasting (e.g., extended NAO persistence), aiding parametric insurance products (e.g., index-based payouts for agriculture). However, amplified variances and teleconnections mean larger losses per event—e.g., a 1K Niño3.4 SST anomaly yields stronger NAO responses in 2080–2100 vs. 2015–2035, potentially raising claims by 20–50% in affected regions.
- Risk Modeling and Financial Implications: Insurers must update catastrophe models to incorporate regime shifts, as current ones may underestimate tail risks under warming. CMIP6 variability highlights uncertainty, but AWI-CM3’s high-resolution (resolving Tropical Instability Waves) suggests conservative estimates.
Potential outcomes
Higher premiums in ENSO-sensitive areas (e.g., Pacific Rim, Europe):
As projected in the AWI-CM3 model under high-emission scenarios, amplified ENSO events could lead to more frequent and severe weather extremes, such as intensified droughts, floods, wildfires, and storms. This escalation in risk would compel insurers to recalibrate their pricing models, resulting in higher premiums to offset anticipated losses. In the Pacific Rim, regions like Australia, California, and Southeast Asia are particularly vulnerable: El Niño phases often exacerbate bushfires and droughts, while La Niña brings heavy rains and cyclones. For instance, the 2024-2025 transition from La Niña to potential El Niño conditions has already contributed to elevated wildfire seasons, with global insured losses from such events pushing insurers to hike rates. In Europe, strengthened ENSO-NAO coupling could mean wetter winters in the Iberian Peninsula and increased storm activity, driving up flood insurance costs. A recent report highlights how physical climate risks, including those tied to ENSO, are already triggering insurance premium rises across Europe, with some areas seeing double-digit increases in 2025. Overall, first-half 2025 saw $162 billion in global climate event costs, with $100 billion insured—40% higher than 2024—signaling a trend where ENSO-amplified events could add billions more, forcing premiums up by 10-30% in high-risk zones to maintain solvency. This might reduce affordability, leading to underinsurance in vulnerable communities and broader economic ripple effects.
Growth in reinsurance demand:
With ENSO supercriticality potentially synchronising global climate modes, the insurance industry faces compounded risks from simultaneous extremes (e.g., Pacific hurricanes coinciding with European floods), overwhelming primary insurers’ capacity. This would spur a surge in reinsurance demand, as companies seek to transfer excess risk to reinsurers like Munich Re or Swiss Re. Analysts predict that climate change, including ENSO variability, could drive long-term reinsurance volume growth, though near-term market softening might temper it. In 2025, natural catastrophe losses are projected to hit $145 billion globally, continuing a 5-7% annual growth trend, with ENSO-influenced events like Atlantic hurricanes contributing significantly. Reinsurers are already noting higher demand amid lingering La Niña effects, which started the severe convective storm season early. This growth could strain reinsurance supply, leading to higher rates (e.g., 10-20% increases at renewals) and innovative structures like parametric reinsurance tied to ENSO indices. However, experts warn that escalating climate spillovers might prompt reinsurers to limit coverage, exacerbating affordability issues for primary insurers and ultimately policyholders. In a high-ENSO scenario, demand could rise 15-25% by mid-century, fostering market consolidation and new entrants specialising in climate risks.
Opportunities for climate-linked bonds or ENSO-hedging derivatives:
The projected ENSO regime shift opens avenues for innovative financial instruments to manage volatility. Climate-linked bonds, which adjust payouts based on metrics like temperature anomalies or ENSO indices (e.g., Niño3.4 SST), allow governments and insurers to hedge long-term risks while funding resilience projects. Recent models suggest converting 3% of major economies’ debt into such bonds could provide effective hedging, with diversification benefits due to low correlation with business cycles. In 2025, these bonds are gaining traction as catalysts for green transitions, potentially attracting investors seeking climate-resilient portfolios. Similarly, ENSO-hedging derivatives—such as weather futures or options tied to ENSO phases—enable risk transference, using financial markets to price and mitigate impacts on agriculture, energy, and insurance sectors. Opportunities include expanding catastrophe (cat) bonds with ENSO triggers, which could grow the market by 20-30% amid rising losses. Despite challenges like 2025’s green bond market headwinds from policy rollbacks, these tools offer insurers ways to diversify risk and capitalize on sustainable finance trends, potentially yielding 5-8% returns for investors while reducing exposure to ENSO whiplash.
If realised under high-emission scenarios like SSP5-8.5, the projected regime shift toward ENSO supercriticality—characterised by amplified amplitudes, increased regularity, and global mode synchronisation—could exacerbate annual insured losses by billions, building on historical precedents such as the 2015–16 El Niño event, which inflicted approximately $45 billion in global economic damages through widespread droughts, floods, and agricultural disruptions.
This intensification, potentially compounding with synchronised modes like the NAO and IOD, would heighten the frequency and severity of “whiplash” weather extremes, straining insurers’ solvency as catastrophe claims surge beyond current actuarial models, which often underestimate tail risks in a warming world.
To mitigate this, the industry must adopt adaptive strategies, including diversified portfolios that spread exposure across less correlated regions and asset classes, as well as parametric triggers—insurance products that automatically payout based on predefined indices like Niño3.4 SST anomalies, bypassing lengthy claims processes for faster liquidity.
Recent advancements, such as the Australian Bureau of Meteorology’s shift in September 2025 to the “relative Niño index“, which adjusts for long-term ocean warming to provide a clearer ENSO signal by comparing Pacific temperatures to global tropical averages, underscore the need for such innovations; this method, informed by L’Heureux’s et al, 2024 research in the Journal of Climate, enhances forecasting accuracy in a changing climate without altering El Niño/La Niña thresholds, enabling insurers to refine parametric products and better hedge against evolving risks while maintaining affordability for policyholders in vulnerable areas.
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- AWI-CM3 is an Earth system model developed by the Alfred Wegener Institute (AWI) that couples an atmosphere model (OpenIFS) with an ocean model (FESOM2) to simulate global climate. AWI-CM3 combines a number of different components to simulate Earth’s climate system, including atmosphere, ocean, sea ice, land surface, and river runoff. ↩︎
- The WCRP Working Group on Coupled Modelling (WGCM) oversees the Coupled Model Intercomparison Project, which is now in its 6th phase. Background information about CMIP and its phases can be found on WGCM website. ↩︎
- The E3SM-1-1 model is a version of the Energy Exascale Earth System Model (E3SM), a state-of-the-science, high-resolution Earth system model developed by the U.S. Department of Energy (DOE) to simulate and predict climate and its impacts on energy infrastructure – it includes biogeochemistry, representing carbon and nutrient cycles in the land, ocean, and ice components. ↩︎
- EC-Earth is an Earth system model developed by a European consortium of national meteorological services and research institutes. EC-Earth3 is the third generation of the model and is also the name of the basic standard-resolution atmosphere-ocean physical model configuration. ↩︎