Whilst it appears that a super El Niño could be on the horizon, a new commentary from VP Bank AG authored by Senior Investment Strategist Bernhard Allgäuer indicates that insurance-linked securities (ILS) can provide portfolio diversification as their returns are driven by natural disasters, rather than financial market turmoil, making them largely uncorrelated with traditional asset classes.
“Currently, probability forecasts from the US National Oceanic and Atmospheric Administration (NOAA) suggest that a super El Niño could be on the horizon from September 2026. The consequences would be extreme weather, which is of particular interest to investors holding insurance-linked securities (ILS) and cat bonds,” Allgäuer explains in his latest update to investors.
Due to the increased likelihood of an El Niño event, a quiet storm season is expected for 2026.
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