Europe's Heatwave Losses Expose a Widening Insurance Gap

Insurers and regulators have warned that a widening share of Europe's climate-related losses is going uninsured, as this summer's heatwaves, drought and wildfires add to a run of costly seasons across the continent.

The so-called protection gap — the difference between total economic losses and insured losses — has grown as premiums rise in exposed regions and some cover is withdrawn altogether.

WHAT IS DRIVING IT

Heat, drought and wildfire losses are harder to model than storms and floods, and much of the damage falls on assets that are underinsured: agricultural output, small businesses, and public infrastructure such as rail and roads that buckle under extreme temperatures.

AFFORDABILITY

In southern Europe, premiums in high-risk areas have risen sharply and some households have dropped cover. Regulators warn this creates a cycle in which the least protected are the most exposed.

PUBLIC COST

Where private cover retreats, the cost falls to governments through emergency relief and reconstruction. Several finance ministries are examining public reinsurance backstops of the kind used for flood risk.

VERIFIED SNAPSHOT

Issue: growing gap between economic and insured climate losses in Europe. Drivers: heat, drought, wildfire. Policy response: public backstops under discussion.