El Niño arrived in 2023 and climate scientists are predicting that it could weaken in Spring 2024. No matter what happens, it will remain a significant weather risk factor for the first part of 2024. This means you should be prepared for and be ready to respond to potential El Niño-driven weather challenges, such as extreme storms, extended periods of drought, and unusual meteorological events that could increase flood risk.
What is El Niño?
El Niño is a natural climate phenomenon characterized by the unusual warming of surface waters in the eastern Pacific Ocean. It affects ocean temperatures and weather patterns from North America, to South America, to Australia. It occurs every two to seven years and is the “warm phase” of the El Niño-Southern Oscillation (ENSO), with La Niña being its "cool phase."
Under normal conditions, strong trade winds push warm surface water westward across the tropical Pacific, resulting in an upwelling of cold water along the coasts of South America. However, during El Niño events, these trade winds weaken, allowing warm surface waters to move eastward, which disrupts the upwelling. This can lead to significant impacts on coastal ecosystems and fisheries, with potentially devastating economic consequences.
The risks El Niño poses to communities and organizations
El Niño’s effects on the global climate are far-reaching, creating teleconnections — large-scale, long-lasting, interrelated climate anomalies — that influence weather patterns worldwide. Strong El Niño events can cause increased precipitation in some regions and droughts in others, affecting water supplies, agriculture and farmers, food processors, manufacturers, and retailers.
Such disruptions of global atmospheric circulation and water temperatures may lead to unusual winter weather in some regions and stronger storms in others.
These extreme conditions can increase the risk and intensity of wildfires, providing drier and more easily ignited grass and brush material, and sparks and flames that spread more rapidly, as recently seen in the tragic Maui wildfire. And this can further raise the risk of flooding, as charred soil acts as a barrier to water absorption.
Events exacerbated by El Niño can cause extensive property and infrastructure damage. Inaccessible roads, extended power and water outages, material and labor shortages, and other factors can lead to major supply chain, transportation, logistics, and supplier and customer business disruptions, further complicating the road to recovery.
Notable El Niño events occurred in 1982-83 and 1997-98, creating significant climatic changes across the globe and resulting in US$4.1 trillion and US$5.7 trillion in global income losses, respectively, according to climate researchers.
Six ways to mitigate El Niño’s risks for businesses
Business leaders and risk professionals should review and refresh their preparedness, response, and recovery plans in order to safeguard people, properties, and operations — and be ready to promptly report insurance claims in the event of losses. This includes:
- Monitoring weather patterns: Keep an eye on weather patterns in your region and around the world. This can help you anticipate potential risks and take action to mitigate them.
- Developing business continuity and contingency plans: Create business continuity and contingency plans for various scenarios – such as droughts, floods, and extreme weather events – which could impact your business operations, suppliers, and customers globally, and be sure to test them regularly. Doing so can enable you to respond promptly and efficiently if a weather-related risk materializes.
- Diversifying your supply chain: Assess your supply chain network in light of the potential risk of disruptions from extreme weather events and consider alternatives. This may entail sourcing materials and products from alternative regions and suppliers, including local ones.
- Investing in infrastructure: Consider investing in infrastructure that can withstand extreme weather events, such as flood barriers and backup power systems. This can help you minimize the damage caused by extreme weather events and recover faster.
- Educating and supporting employees: Inform employees about the risks associated with El Niño, how your organization will communicate with them about such events, and how your employees can help mitigate impacts on the business and themselves. This may involve providing training on emergency procedures and best response practices.
- Updating your insurance program and claims processes: Review your property, natural catastrophe, business interruption, environmental, and related coverages to assess your insurance protection in the event your business is impacted by El Niño-driven events. This should include evaluating any changes in values, determining what should be self-insured, and identifying areas where parametrics could be advantageous. You should also discuss claims communications and preparations protocols with your insurers, adjusters, brokers, and specialist resources, which can help streamline your claims process if the worst happens.
Three steps to mitigate El Niño’s risks for homeowners
- Review your homeowners insurance policy: Connect with your agent or broker to understand your homeowners insurance coverage and what it covers. Flood event disasters are typically not covered by homeowners insurance.
- Learn about your flood risk and get a flood insurance quote: Get a personalized assessment of your home’s flood risk from your insurance agent with your flood insurance quote. National Flood Insurance Program (NFIP) policies typically require a 30-day wait, so now is the time to purchase a policy.
- Understand the claims process: If your home is impacted by El Niño-driven events, make sure you know how to initiate the claims process for your insurance policies.
Three steps to mitigate El Niño’s risks for renters
- Review your renters insurance policy: Connect with your agent or broker to understand your renters insurance coverage and what it covers. Flood event disasters are typically not covered by renters insurance.
- Learn about your flood risk and get a contents-only flood insurance quote: Get a personalized assessment of your flood risk from your insurance agent with your contents-only flood insurance quote. National Flood Insurance Program (NFIP) policies typically require a 30-day wait, so now is the time to purchase a policy.
- Understand the claims process: If your rental is impacted by El Niño-driven events, make sure you know how to initiate the claims process for your insurance policies.
Connect with your agent or broker to discuss your coverage and get a flood insurance quote if you do not have a flood insurance policy.