Climate
change is turning parts of Europe into an insurance nightmare
Frequent,
expensive natural disasters are testing Europe’s ability to protect itself
against the cost of global warming.
https://www.politico.eu/article/climate-change-europe-insurance/
A plane
flies past a wildfire in Cotignac, France on July 23, 2026. | Thibaud
Moritz/AFP via Getty Images
July 29,
2026 8:26 pm CET
By Marianne Gros, Giorgio Leali and Aude Le Gentil
BRUSSELS — As
wildfires menaced the outer suburbs of Bordeaux and Madrid this week,
Europe once more faced an uncomfortable reality: a
rapidly warming planet threatens to make parts of the continent
uninsurable.
The
record-breaking blazes — which have forced hundreds of thousands to flee their
homes, destroyed wildlife and threatened cities once thought immune to wildfire
— are the latest in a series of climate-related natural disasters that are
forcing policymakers to rethink how to handle the risk.
The answer,
increasingly, is a brutal one: Either governments step in to protect citizens
from soaring insurance premiums, straining public budgets; or people face being
left with no protection at all when their homes are flooded or burn down.
The growing
risk has prompted the European Central Bank and EU insurance regulator to call on Brussels to take a more active role by setting
up an EU-level reinsurance scheme and a public natural disaster fund.
"What’s
happening in Europe this summer isn’t unique," deputy governor of the Bank
of France Agnès Bénassy-Quéré said. "These heatwaves and forest fires are
part of a marked global increase in extreme weather events that imposes real
costs on households, businesses, and governments," she said.
Wildfires are
“the fastest-growing weather peril globally,” even if
they have “so far contributed only a relatively small share of
insured losses in Europe,” said Nikhil da Victoria Lobo, who leads
reinsurance giant Swiss Re's Property & Casualty Reinsurance
business for western and southern Europe, the Middle East and
Africa.
Extreme
weather events already cost a fortune in repairs for Europe’s
cash-strapped governments. Data from the European Environment Agency shows
weather-related extremes cost the EU economy over €200 billion in economic
losses between 2021 and 2024.
Insurance
firms, meanwhile, are hiking their prices and even pulling out
of certain at-risk areas, leaving governments and individuals to
bear the cost of uninsured losses.
“In Europe,
75 percent of the damages related to natural disasters are not insured,”
said Ariel Le Bourdonnec, a campaigner working on insurance at the NGO Reclaim
Finance, citing data from the European Insurance and Occupational
Pensions Authority. For insurers, flooding and storms are the most costly
natural disasters, followed by extreme heat and wildfires, according to Insurance Europe.
Experts
predict it’s
only going to get worse. As fossil fuel use continues to increase globally,
temperatures are rising at an unprecedented rate, disrupting the
planet’s climate and ecosystems. Global warming causes more weather
extremes like wildfires, floods and droughts.
“Insured
wildfire losses in Europe have increased by an estimated 8 to 11 percent per
year in real terms since 1970,” added SwissRe’s da Victoria
Lobo.
Damages
pile up
In France,
where a massive wildfire still burns in the south-west Gironde
and Landes departments, the government has promised that
insurance companies will cover the accommodation costs and the damages
for over 200,000 people who have been evacuated.
At least 240
homes have been lost in the fire so far. Wildfires are covered by home
insurance, and the government has promised to streamline the process, meaning
most of the victims should receive money to rebuild their
houses. “Insurers are playing the game,” Industry Minister
Sébastien Martin told RMC on Tuesday.
But
wildfires will also have a direct impact on France’s already strained
public finances for reforestation, reconstruction and for
unemployment benefits paid to companies that have been forced to put
their activities on hold.
In the Gironde department, around 130,000 workers are currently unable to work because of the wildfires, and
13,000 businesses have been evacuated.
Martin ruled out a massive subsidy plan, calling for “a
concrete, targeted and precise response,” adding that it was too early to quantify the economic
damage caused by wildfires.
Still, the
French environment ministry estimates that reforestation efforts to cover all
the land lost to fires in the country this year could cost €1 billion.
The Spanish
insurance firm Mapfre said on Monday that it
had received 116 claims so far, mostly related to home insurance. A
spokesperson for the company said that the fires “are not expected to have
a significant economic impact."
Pushed
out
But the
cumulative effect of climate-related natural disasters continues to put
pressure on insurers. With every fresh disaster, primary insurers need to
ratchet their premiums to avoid making losses on new policies.
In some
parts of Europe, “the peak risks are becoming a reality. Even the reinsurers
themselves, who are supposed to protect the insurers, are pulling back,
reducing their coverage, or imposing deductibles, which we call retentions,
that are getting higher,” said Thierry Langreney, president of the climate
NGO Les Ateliers du Future.
Tourist
industry body SKÅL International, citing national data, says that premiums
for tourism businesses in Spanish areas prone to wildfires have risen by 15
percent annually over the past five years, while premiums for coastal
properties in Italy rose 25 percent in the five years through 2022 due to more
frequent storm surges and flooding.
According
to the French insurance lobby France Assureurs, home insurance
premiums already increased by 7.8 percent in 2025, while the climate
disaster premium — which doesn’t cover wildfires — rose by
66 percent.
For now,
most French residents can still easily obtain home insurance anywhere in
mainland France, according to the public reinsurer. But it is seeing
early signs of strain in a few cities, where insurance is becoming harder to
obtain, or increasingly unaffordable.
Bit by
bit, such trends push the cost of insurance beyond what
businesses or households can afford, leading to an ever-wider ‘protection
gap’. Around half of global economic losses from natural disasters were
uninsured last year, according to insurance giant Aon.
“There is a
real risk that this already sizeable gap could widen further as natural
catastrophes increase, with serious consequences for people’s daily lives and
for economic activity in affected regions,” said Petra Hielkema, who chairs EIOPA,
during a conference on climate risk last April.
As a result,
governments often have no choice but to act as a backstop, increasing public
spending and debt, according to a recent study by the Network for Greening the
Financial System, which brings together central banks and financial supervisors
from across the world.
“The
negative effects are felt via a higher cost of insurance coverage in following
years, or higher public debt,” said the report,
which identified negative financial consequences of recent
natural catastrophes on GDP, inflation and the credit
system.
"Sometimes
the private sector bears the brunt of the burden, other times the damage
appears in public finances. But ultimately, these events are costly for the
countries struck by them, and beyond," said Benassy-Quéré of the Bank of
France.
Change
the system
The European
Central Bank and EIOPA have proposed addressing the problem via a new EU
public-private reinsurance scheme and a new EU fund for public disaster
financing.
The European
Commission is expected to present a package of climate resilience and
risk management measures later this year.
“Public
authorities must continue providing emergency support, but Europe should also
develop common financial instruments that strengthen solidarity and help share
climate risks across member states,” said César Luena, a Spanish socialist
MEP.
“The future
European Climate Adaptation Framework should include a European climate
reinsurance or risk-pooling mechanism,” he said.
In
France, other climate disasters are covered by a public-private
system that makes climate insurance mandatory and spreads the risk between
insurers and the state.
"The
mechanism comes down to subsidizing the insurance contract located in the areas
most exposed by a margin that insurers take from the mandatory insurance in
less exposed areas at a rate set by the State,” said Langreney, who advised the
French government back in 2024 on how to update the model.
“It's
probably a good practice that's essential to adopt for other European countries
that would like to make insurance more widespread,” he added.
Insurers,
meanwhile, want to see more action taken on prevention. Countries
should “stop developing assets in high-risk areas” for
"fire-prone areas, but also to flood-prone areas,”
said Tobias Grimm, chief climate scientist at Munich Re.
Some groups like Reclaim
Finance also argue that large insurance firms should foot a larger
part of the bill since their profits are going up. “There's a portion of
these damages that’s not covered; this portion keeps growing, and on the
other side you have insurers whose profits keep increasing,”
Le Bourdonnec said.
Marianne
Gros reported from Brussels. Giorgio Leali and Aude Le Gentil reported from
Paris. Jakob Weizman and Geoffrey Smith contributed reporting.
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