By: Falvey’s Risk Intelligence & Analytics Team
Global trade is entering a period of renewed volatility, driven by both environmental shifts and geopolitical disruption. Two crucial developments are beginning to reshape the risk landscape: the return of El Niño conditions in the Pacific and sustained pressure on global container shipping rates. While these trends originate in very different places, their impacts converge into one: increased uncertainty and exposure across global supply chains.
The Return of El Niño
After several years of La Niña cooling, the Pacific Ocean is transitioning toward El Niño conditions, with forecasts suggesting a meaningful probability of a strong or even “Super” El Niño emerging by 2026.
Historically, major El Niño events have:
- Disrupted global rainfall patterns, increasing flood risk in the Americas and drought conditions across Southeast Asia and Australia
- Reduced production of key commodities like coffee, cocoa, wheat, and rice
- Contributed to temporary sea level changes and broader ocean instability
Additionally, past events have shown operational consequences. During the 1997–1998 Super El Niño, Panama Canal transit capacity declined due to water level restrictions, reducing throughput and creating downstream congestion. All in all, El Niño is introducing a systemic disruption, and those effects will ripple through insured cargo.
Container Rates Surge: Geopolitics Drive Cost and Complexity
Simultaneously, the global shipping market is under pressure from ongoing geopolitical tensions, more specifically in and around the Strait of Hormuz.
Recent developments have driven:
- Transpacific container rates up ~40% from pre-crisis levels
- A 25% single-week spike in transatlantic rates
- Fewer vessels transiting key chokepoints, with hundreds of ships delayed or stranded
To avoid high-risk regions, many vessels are rerouting around the Cape of Good Hope, adding 10–14 days to transit times. This materially increases:
- Cargo time in transit
- Accumulation risk
- The duration of insurer exposure
At the same time, container lines are entering this period with reduced profitability, limiting their financial flexibility to absorb ongoing disruption. Overall, higher rates are only part of the story. Longer transit times and rerouting are expanding the risk landscape.
What This Means for Brokers
Taken together, these trends point to a more complex and less predictable operating environment.
Brokers should be mindful of:
- Accumulation risk driven by delays and congestion
- Valuation pressure on commodities impacted by climate disruption
- Extended exposure periods due to longer transit routes
- Geopolitical risk factors influencing routing, pricing, and coverage
This is a moment where proactive risk assessment and clear communication with clients becomes increasingly important.
Key Takeaways
Today’s risk landscape is being reshaped by forces that extend beyond traditional underwriting considerations. Climate patterns and geopolitical tensions are driving interconnected disruptions across global trade, amplifying exposure at multiple points in the supply chain. Falvey’s Risk Intelligence team is actively monitoring these developments and is available to help you evaluate exposures, identify vulnerabilities, and ensure your clients’ programs remain aligned with today’s evolving risk landscape. Contact us to learn more about how we can help your clients mitigate risks.
