This year’s El Niño is heating up to be one of the strongest on record, and it has already stoked wildfires in Asia, hurricanes in the Pacific and fishery closures in South America. The World Meteorological Organization, a United Nations agency, recently forecast that a very strong El Niño will persist through winter, warning of flooding, drought and extreme heat.
What makes this worth a page in a financial letter is a quality most risks don’t have: it is forecastable, and it comes with a map.
How it works, briefly
The phenomenon occurs every few years and lasts about a year. Normally warm water collects in the western Pacific; in El Niño years that mass of warm water shifts east toward South America. Scientists measure those ocean temperature changes to predict how strong an event will be, and this summer’s east-central Pacific temperatures are among the highest on record — projected to exceed the powerful El Niños of 1997, 2015 and 1982.
As warm water shifts east, the tropical rains it generates move with it, creating fertile conditions for hurricanes. Named storms in the northeastern Pacific are running about 40% above average for this time of year, per Colorado State University data, and Hawaii has seen unusually strong cyclone activity — Hurricanes Lala and Lowell brought destructive winds and flooding.
The fires are the other signature. Strong El Niños in 1997 and 2015 fueled devastating blazes in Indonesia; this year more than half a million acres have burned there, harming air quality as far away as Singapore and the Philippines.
Where it reaches
Further than you would think. As ocean evaporation shifts east it generates warm air that rises and migrates north and east, feeding the subtropical jet stream and propelling it further over North America, where it blows stronger and steadier.
The result: more rain and storms across the southern United States, peaking in winter — potentially flooding and coastal erosion in California, severe thunderstorms in Gulf states.
And well beyond. “Southern Africa has a pretty strong tendency for drought during El Niño,” says Emily Becker, an atmospheric scientist at the University of Miami. “These can have very significant impacts because of food insecurity.”
Two silver linings
El Niño isn’t all bad, and the first consolation is substantial. While it promotes cyclones in the Pacific, it stifles them in the North Atlantic. Warm air rising off the Pacific generates high-altitude winds that blow east toward the tropical Atlantic, and as hurricane forecaster Phil Klotzbach of Colorado State explains: “This results in increased levels of Atlantic vertical wind shear. Too much vertical wind shear tears apart hurricanes.”
The North Atlantic typically gets more than three hurricanes by this point in the year. So far there have been none.
The second consolation is the one worth acting on. “Disasters happen all the time,” Becker says. “And in El Niño years, we actually know where they will happen. We can prepare.”
What preparing actually means
Not a market call — weather trades are for people who do it professionally, and the insurance and agricultural implications are already being priced by participants far better informed than any newsletter.
What it means is a household review, and it is genuinely seasonal work:
Know what your homeowner’s policy excludes. Flood is the classic gap — standard policies generally don’t cover it, and a great many people in newly flood-exposed areas learn this after the water arrives rather than before. Wildfire coverage and deductibles have been repriced hard in several states. Check whether your policy pays replacement cost or actual cash value, because those are very different cheques for the same loss.
Then the boring, decisive one: liquidity. A disaster is an immediate cash-flow event long before it is an insurance settlement. Deductibles, temporary housing, replacing what can’t wait — all of it gets paid weeks or months before a claim does. That is what an emergency reserve is actually for, and it is the part of the plan people fund last.
You don’t wait for the first drop to find your umbrella. This year the forecast is on the wall with a map attached, which is about as much warning as any risk ever gives. Fifteen minutes with the policy and the reserve balance is a reasonable way to use it.