The triple-dip La Nina, which has brought record insurance losses from flooding this year, may be signalling a shift toward a prolonged drought cycle, a report released by Aon Reinsurance Australia says.

The report adds an insurance lens to a briefing note by ClimaLab scientist Ian Goodwin examining correlations between a longer-term ocean circulation pattern and more well-known climate drivers that affect Australia.

“Our analysis of historical climate analogues and modelled projections suggests a return to pervasive El Nino-like climate over the coming decade is increasingly likely because of an impending flip in the underlying ocean circulation in the Pacific Ocean, known as the Pacific Decadal Variability (PDV),” Aon Senior Catastrophe Research Analyst Thomas Mortlock says in a LinkedIn post.

“If this happens, industry loss data suggest this may result in lower flood, cyclone and overall insured losses for Australia for the coming decade, with potential consequences for bushfire and drought management.”

Wet weather in eastern Australia is associated with La Nina events while the opposite phenomenon, an El Nino, tends to bring droughts and bushfires, which typically have led to lower insured losses compared to cyclones and floods.

The relationship between bushfire losses and El Nino is less pronounced than with the link between La Nina events and cyclones and flooding.

The current triple La Nina is of similar magnitude to the 1892-95 and 1973-76 events that both resulted in significant PDV regime shifts, the report says.

“The historical record shows us that whenever a persistent La Nina-like PDV has culminated in a triple- or double-dip La Nina, it has preceded a phase change in the PDV to an El Nino-like state that has then persisted for at least a decade,” Dr Goodwin says.

The report concludes that the build-up of upper ocean heat content in the subtropical south-west Pacific means the PDV is nearing a tipping point, where a moderate El Nino event in the 2023-2025 period could flip the PDV to the El Nino-like phase for following years.

Aon says “La Nina may not be done with us yet” and there remains the potential for elevated flood and cyclone-related losses, but a compelling story emerges for post next year.

“The big wet could soon become the big dry,” the report says. “This would be good news for overall insured losses but would also bring other broader societal concerns associated with periods of reduced rainfall enhanced by background global warming.”

The PDV is a relatively unknown quantity to reinsurers and insurers, but has the potential to lock in the persistence of certain types of weather for Australia’s east coast and is an important factor to consider for the decade ahead, it says.