Helping clients prepare for the impact of hurricane season
Guy Carpenter, a Marsh business, recently released its 2026 North Atlantic Hurricane Outlook, which provides insights into potential storm impacts, especially as they relate to the (re)insurance industry. In this episode of Fo[RE]sight, Guy Carpenter’s Jeff Schmidt, Vice President and Meteorologist, and Will Stikeleather, Analyst and Meteorologist, discuss how a change from La Niña to El Niño conditions affects hurricane activity, the impact of above‑average sea surface temperatures, and what insurers and property owners should focus on this season from a risk-management perspective.
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Transcript
Eric Stenson: Guy Carpenter, a Marsh business, recently released its 2026 North Atlantic hurricane outlook, which provides insights into potential storm impacts, especially as they relate to the reinsurance industry. In this episode of Fo[RE]sight, Guy Carpenter's Jeff Schmidt, Vice President and Meteorologist, and Will Stikeleather, Analyst and Meteorologist, discuss how a change from La Niña to El Niño conditions affects hurricane activity, the impact of above-average sea surface temperatures and what insurers and property owners should focus on this season from a risk management perspective.
Thank you very much for joining me today.
Jeff Schmidt: Thanks for having us.
Will Stikeleather: It's great to be here.
Eric Stenson: Well, thank you very much. I think I'll start with Will. The outlook emphasizes an approximate 90% chance of El Niño during the peak season. Can you explain how El Niño typically alters Atlantic hurricane activity and why that matters for this storm season?
Will Stikeleather: There's been a very strong signal for an El Niño for a couple months now as we approach the upcoming hurricane season. And actually, just after the report was released, the NOAA Climate Prediction Center released a new forecast for the upcoming El Niño, providing a 98% chance of this occurring during the peak season. So, it's near a certainty that we're going to have El Niño conditions across the Atlantic.
Just a brief refresher for everyone on what El Niño is. El Niño occurs when sea surface temperatures in the central and eastern tropical Pacific are greater than a half degree Celsius above average, and this strip of warmer waters generates some changes in the global atmospheric circulation. So, across the tropical Atlantic, this commonly produces much stronger upper-level westerly winds, which helps increase vertical wind shear across the main development region, or MDR, of the Atlantic, which is the stretch of the ocean between the African coastline and the Caribbean. Higher wind shear levels will generally tear apart developing storms, and this helps suppress the number and intensity of hurricanes that form over the Atlantic.
Also, El Niño will increase the atmospheric stability over the Atlantic Ocean, so the warmer waters of El Niño generally lead to more thunderstorm activity or convection across the eastern Pacific. This generates a lot of rising air, which then has to sink, and this occurs over the tropical Atlantic in general. This sinking, stable air is not good for the creation of convection across the Atlantic, which then hinders the development of hurricanes. So overall, El Niño has two major effects that limit hurricane activity, hence why we can expect a below-average season under these conditions. Though that said, El Niño is a probabilistic influence. It reduces basin-wide frequency, but not the possibility of impactful storms.
Eric Stenson: I was also curious – what distinguishes a super El Niño from a regular El Niño in terms of expected storm activity?
Will Stikeleather: So, a super El Niño is when a El Niño gets an anomaly in that stretch of the Pacific, sea surface temperatures of greater than 2 degrees Celsius above normal. In other terms, it's just a really strong El Niño. And generally, this means that the typical patterns we see during an El Niño are a bit enhanced. So higher wind shear and more stability across the Atlantic. We can expect reduced overall storm count for a Super El Niño compared to, say, a moderate one.
Eric Stenson: OK, Jeff — the report forecasts a generally below-average season, but it notes above-average sea surface temperatures, as Will mentioned earlier, in the Gulf and subtropical Atlantic. How do those warmer pockets interact with El Niño effects? And could they produce localized increases in risk?
Jeff Schmidt: Absolutely. So, sea surface temperatures play a huge role and certainly can produce localized increases in risk. Will mentioned that El Niño generally tends to suppress basin-wide activity, but the sea surface temperatures at a local level, they're an independent source of fuel for storms and for rapid intensification, which is when storms strengthen really, really quickly. So, if shear weakens and the moisture profile is just right for a storm in the atmosphere, then things can be very favorable for storm genesis. Warm Gulf and subtropical Atlantic waters can partially offset the suppressing effect of El Niño locally because of what I just mentioned. If you have storms that do form nearby, or if they track into some of these warmer pockets, those storms can maintain strength near landfall, or they can even intensify.
2023 was a great example of a season where something like this happened. The forecast was for a near-average season in terms of activity because there was an El Niño present, but sea surface temperatures were extremely elevated. And so, going into the season, a big question that was unanswered amongst many forecasters was what would essentially win out between the sea surface temperatures producing a favorable environment, and El Niño producing an unfavorable environment. So that's why forecasts early on in 2023 were near average.
What actually turned out is that the sea surface temperatures, in a way, won out. 2023 turned out to be the fourth-most-active season on record in terms of total storm activity with 20 named storms. So, yes, all that to say, sea surface temperatures certainly can play a large role and a localized one as well.
Eric Stenson: Thanks, Jeff. Are there particular coastal regions or types of storms more likely to be influenced by these warm SSTs?
Jeff Schmidt: I'd say so. Regions that are along the Gulf Coast, areas like Florida, the Gulf states, areas in the Western Caribbean, and even parts of the US Southeast, are most sensitive to warm anomalies of the sea surface temperatures.
Again, storms that enter these warm poles will be able to feast off of the favorable environments and maintain strength or even intensify right before landfall. Additionally, many of these areas off the coast have really shallow continental shelves, which can increase storm surge vulnerability, which further amplifies an individual's storm's impacts.
Eric Stenson: Thank you. Will: The report highlights drier-than-normal conditions in the main development region and parts of the Caribbean. Do you have high confidence in that moisture forecast, and what are the primary drivers that are behind it?
Will Stikeleather: I'd say our confidence is decently high for this moisture forecast. Seasonal moisture anomalies are driven by a lot of different factors and major dynamical models and ensemble forecasts generally agree on a drier main development region this year.
But sub-seasonal variability in local dynamics can alter moisture as well. So, I guess the primary drivers for this forecast are obviously the El Niño. There's very good consensus that El Niño is going to suppress deep convection, and therefore moisture, across the main development region.
But we also need to watch what's known as the Saharan air layer. Easterly trade winds will push huge plumes of dry and dusty Saharan air off the African continent and into the main development region, sometimes reaching as far west as the Caribbean. This dusty Saharan air, as you'd expect, does not contain enough moisture to support hurricanes.
Also, just looking at the general sea surface temperature pattern across the MDR right now, we're generally seeing roughly average to slightly below-average sea surface temperatures. There are some locally warm pockets there, but the large-scale configuration of sea surface temperatures across the main development region may not have that uniformly supportive SSTs for sustained convection. Therefore, it's unlikely that warm waters are going to force above-average moisture in the region for this upcoming season.
Eric Stenson: Thanks very much, Will. Jeff – the report stresses that storm counts don't directly map to insured losses. From a risk management or insurance perspective, what should insurers and property owners focus on this season, regardless of the overall activity forecast?
Jeff Schmidt: This is a great point that we always try to hit home. The key principle here is that a low storm count does not guarantee low losses. Losses depend first and foremost on the number of landfalls. And then the impacts of those landfalls, right? What is exposed? What's the vulnerability of the properties exposed? What is the storm's track and intensity at landfall? Storm surge, the size of the storm, how prepared and how resilient local communities are.
All of these things come into play. I think a practical focus area for insurers would be to think about things like exposure concentration. Knowing where you are exposed, checking your geographic and policy concentration in coastal counties and along the barrier islands, and making note of older buildings that might not be built to new building codes. At a more granular level, insurers and risk managers can start to assess vulnerability details like roof type or elevation, flood defenses, building codes, mitigation retrofits.
I think it's also crucial from an insurer's perspective for the claims readiness component and the business continuity component of things, right? Being aware of and planning for adjuster capacity, communication plans, and CAT response procedures within the organization.
For property owners, there's plenty of tips to improve home resiliency. Things like maintaining or completing roof, window, and flood proofing maintenance before season peak. The Institute for Business and Home Safety, or the IBHS, releases a ton of information for hurricane preparedness that can be leveraged. It's also important as a property owner, as a homeowner, to be aware of what your insurance does and does not cover. Do you have flood insurance? Do you understand any wind versus flood coverage gaps? Then, of course, updating household emergency plans, evacuation routes, having an emergency kit, a first-aid kit, a battery-powered radio, etc. All of these things can play a role.
Eric Stenson: Thanks, Jeff. Do you have any recent examples where few storms produced outsized losses?
Jeff Schmidt: Absolutely. I'll give you two. In recent years, I would say 2022 could act as an example. That was a year where we had what we would consider an average amount of basin activity. There were 14 named storms. But it was really Hurricane Ian that drove the majority of insured losses, which, as we all know, were quite severe. So, in that case, one storm in an average season really drove the majority of insured losses. I'll give you an even better example, and that's 1992. In 1992, there were only seven named storms in the Atlantic Basin that year, which is significantly, significantly below average.
Of those seven, only one of them was a major hurricane. But that storm made landfall as a Category 5 just south of Miami. And that storm was Hurricane Andrew, which at the time was the costliest hurricane on record. So, it certainly has happened in the past, and it definitely can happen again.
Eric Stenson: I certainly remember Andrew quite well. Will: There’s always some uncertainty in seasonal forecasting. What are the biggest unknowns right now that could alter your projection between now and the end of peak season?
Will Stikeleather: There are lots of factors we have to consider as we move through the hurricane season.
The most important one is the evolution of this current El Niño event. So, the timing and peak amplitude remain a key uncertainty and a weaker or later-arriving El Niño kind of lowers the confidence that we have in suppressed hurricane activity, especially at the start of the season.
We also need to pay attention to the evolution of sea surface temperatures across the Gulf of Mexico and other coastal regions, as localized warming or cooling trends can change the potential within coastal intensification, which is critical for these events as they approach landfall.
As I mentioned previously, El Niño is a climate pattern that has a probabilistic influence on hurricane activity. And even though it's a bit hostile to hurricane development, there are some patterns that can lead to more favorable windows for development in the shorter term. One of which is what we call the Madden-Julian oscillation, or MJO. This is an example of sub-seasonal variability. In short, it tracks thunderstorm activity that moves from the Indian Ocean across the maritime continent and into the Pacific Ocean, and similar to how El Niño thunderstorm activity has major impacts on weather patterns thousands of miles away across the Atlantic, the position of these MJO thunderstorms can enhance or reduce hurricane activity across the Atlantic Ocean as well.
Another driver of sub-seasonal variability are what we call Kelvin waves. These are huge atmospheric waves that travel from west to east. Some waves will suppress convection as they pass overhead, while others, which are known as being convectively coupled, can enhance thunderstorm activity for a week or two as they move through.
So, you can have a lot of sinking air from an El Niño as the background state. But if a convectively coupled Kelvin wave comes through, this can kind of offset some of that stability that we have across the basin, therefore helping promote more hurricane activity.
I mentioned Saharan dust. This is something critical to track. And also, the steering flow and mid-latitude patterns are critical, as these determine where hurricanes go, and features such as the Bermuda High can steer where hurricanes go. And even if one forms, the position of these steering effects is critical in determining if the storm will go harmlessly out to sea or track into the United States. So, we need to pay attention to that as well.
So, in short, you know, there's lots of factors that can change the risk picture on the timescale of a couple days to a couple weeks, or even a couple months. Lots of unknowns out there. The El Niño is kind of the primary driver, but we need to pay attention to a lot of other factors as we move through peak season to get a full handle on how the 2026 hurricane season is going to behave.
Eric Stenson: Will – thank you. Jeff: What practical preparedness steps would you recommend this year, given a lower activity expectation, but elevated sea surface temperatures in some areas? Are there mitigation actions that can be overlooked when forecasts suggest a quieter season? What tools does Guy Carpenter offer that can help clients properly evaluate hurricane risk?
Jeff Schmidt: I'll go back to a similar theme about the correlation of losses. Just because the seasonal outlooks this year call for a lower frequency of storms does not mean that our level of preparedness should change. We really should be equally prepared regardless of an above-average, a below-average or a near-average forecast. So, it's important not to overlook any mitigation actions. Everything that I mentioned in the previous question, I think, holds still. A common saying in our industry is all it takes is one.
A seasonal outlook that calls for below-average activity does not indicate that there would be no impacts or lower impacts, just that there's a lower probability. Again, I mentioned earlier some of the things that insurers and property owners should be aware of, and some tips that individuals can take. Above all, if you're in the path of a storm, I think it's most important to have an established plan and to follow guidelines from local authorities and emergency managers.
You asked how Guy Carpenter can help, and there's a number of ways that Guy Carpenter supports our clients during ongoing events.
So first and foremost, clients can subscribe to the CAT Resource Center on guycarp.com. This is where our team releases a ton of insights during ongoing events. Things about the forecast of the storm, things about impacts, helpful links, perhaps comparisons to historical storms and things of that sort. Clients can also reach out to their analytics teams for reports that get generated in real time during events.
So, these are really, really valuable pieces of information that can help assess exposure. Additionally, individuals can leverage the GC Advantage Point platform for real-time visualization of current storms against their in-force portfolio. I would encourage everyone to reach out to a member of either their Guy Carpenter account team or the North America Peril Advisory team for additional information and support.
Eric Stenson: Thank you very much, Jeff and Will, for sharing your insights with us today. It has been very interesting to see how a change from La Niña to El Niño conditions affects hurricane activity, or at least the potential for hurricane activity, the impact of above-average sea surface temperatures and what insurers and property owners should focus on this season from a risk management perspective.
Anyone wanting to learn more, or who would like to engage with a Guy Carpenter expert directly, should visit guycarp.com and click on Explore Solutions.
Please look for the next episodes in our series as we address additional themes connected with the reinsurance environment. And thank you to our audience for joining us on Fo[RE]sight, a podcast series from Guy Carpenter, a Marsh Business.