Key facts
- Uninsured climate-related catastrophe losses in the EU are significant.
- Only a quarter of climate-related damages in the EU are covered by insurance.
- These uninsured losses could impact national budgets by 1-2% of GDP.
- EU public finances are already burdened by other costs.
- Climate events are increasing in frequency and intensity.
Uninsured climate-related catastrophe losses in the European Union are substantial, with estimates indicating that only approximately a quarter of all damages are covered by insurance. This significant gap between total damages and insured losses presents a considerable risk to the public finances of EU member states. Projections suggest that these uninsured climate damages could impact national budgets by as much as 1-2% of GDP. This fiscal strain is particularly concerning given that public finances across the EU are already under pressure from various other expenditures and economic challenges. The increasing frequency and intensity of climate-related events, such as floods, heatwaves, and storms, exacerbate this situation, creating a growing fiscal burden that governments must manage. The lack of comprehensive insurance coverage means that a larger portion of the recovery and adaptation costs will likely fall on national treasuries, potentially diverting funds from other essential public services or requiring increased borrowing. This situation highlights the vulnerability of EU public finances to the escalating impacts of climate change and the need for robust adaptation and mitigation strategies, as well as potentially new financial instruments to manage these growing risks.