In a new report, SCOR Investment Partners has said that while outlooks for the 2026 Atlantic hurricane season appear to be more positive compared to recent years, largely due to the emergence of strong El Niño conditions over the summer, portfolio construction remains focused on diversification and resilience, with a key objective of maintaining a high level of shock‑absorption capacity.
SCOR Investment Partners is the asset management arm of the French reinsurance group and a specialist manager of insurance-linked securities (ILS) funds.
In its report, that focuses on the implications that the Atlantic hurricane season could have for the ILS market, the firm outlined that this year’s season is expected to be “significantly quieter than normal”, with activity projected to well below both recent years and long-term averages.
These forecasts are mostly driven by three indicators: the El Niño/La Niña environment, sea surface temperatures and the Saharan dust.
Beginning with El Niño/La Niña, SCOR Investment Partners explains that current estimates suggest a transition from a weak El Niño in early summer to a strong to very strong event by August–October, coinciding with the peak of the hurricane season.
“As the season progresses, conditions are expected to increasingly favour stronger El Niño intensities during these critical months for hurricane development. The magnitude of the expected anomaly suggests conditions that could exceed those observed during the previous strong event in 2015 and may even rank among the most pronounced episodes since 1950,” the firm noted.
Adding: “This warming of the Pacific significantly alters atmospheric circulation and leads to enhanced vertical wind shear (the variation in wind speed and direction with height, which is a critical factor in determining whether severe thunderstorms will develop) across regions typically favorable for hurricane development. This is particularly true over the Caribbean Sea and the western tropical Atlantic (the Main Development Region).”
Conversely, El Niño augments sinking motion over the Atlantic, bringing drier air from upper levels down toward the surface. As a result, this process reduces the availability of moisture, a crucial element for convection, thereby further inhibiting storm development and intensification.
Taken together, SCOR Investment Partners states that the combination of stronger wind shear and reduced atmospheric moisture creates an environment that is structurally unfavourable for tropical cyclone formation, which ultimately leads to lower overall hurricane activity.
Regarding sea surface temperatures, current patterns indicate a slightly warmer-than-average Gulf of Mexico, while the Main Development Region, which includes the Caribbean Sea and the tropical Atlantic, remains somewhat colder than average.
Looking past surface temperatures, attention is also given towards ocean heat content, which reflects the amount of heat stored not only at the ocean surface but also in its depths.
“It provides a more stable and less volatile assessment of the ocean’s available energy than sea surface temperature alone and is therefore widely used to evaluate conditions over the coming months,” SCOR’s report explained.
Moreover, the presence of the Saharan dust, the third driver of Atlantic hurricane activity, accounts for the large masses of dry and dusty air over the Atlantic, which ultimately creates hostile conditions for hurricane formation.
Given that this happened during last year’s season, SCOR Investment Partners stressed that the impact of Saharan dust remains difficult to anticipate for this year.
Its intensity is closely linked to soil dryness across the Sahel region, which depends on recent precipitation patterns. However, based on rainfall observations over the past three months, conditions appear to be broadly near average, slightly above or below in certain areas, but without any substantial anomalies.
“Overall, the current outlook for the Atlantic hurricane season appears significantly more positive than in recent years, largely driven by the emergence of strong, if not exceptional, El Niño conditions over the summer,” SCOR Investment Partners added.
The firm importantly highlights that seasonal forecasts remain inherently uncertain and probabilistic, and even during relatively quieter years, a single landfalling hurricane in a densely populated area can materially change the outcome, which was illustrated by Hurricane Andrew back in 1992.
“Against this backdrop, continuous monitoring of key climatic and oceanic indicators remains essential in the coming weeks and throughout the season. As always, portfolio construction remains focused on diversification and resilience, with the objective of maintaining a high level of shock‑absorption capacity across a wide range of scenarios,” the firm concluded.
Sidney Rostan, Head of ILS, SCOR Investment Partners, told Artemis: “As every year, we may adjust our funds’ positioning in response to market conditions and evolving climate signals, with a constant focus: maximising diversification and strengthening resilience to absorb potential shocks.”
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