Brussels: Direct economic losses caused by extreme weather and climate events in the European Union amounted to approximately pound 822 billion between 1980 and 2024, including more than pound 208 billion in the 2021-2024 period alone, according to estimates by the European Environment Agency.
According to Emirates News Agency, the impacts of climate change in Europe have become an increasing risk to public finances, as floods, wildfires, heatwaves, and droughts become more frequent, at a time when governments are facing mounting pressures from higher defence spending, ageing populations, and debt-servicing costs.
Moreover, only a quarter of climate-linked catastrophe losses are insured in the EU, with coverage in some countries below 5 percent, the EU estimates. Some fear that level of insurance coverage will only get smaller as a proportion of overall costs as extreme weather events occur more regularly.
Economic think tank Bruegel calculated that, while most of the 2021 flood damage was covered by insurance in Belgium, the low level of insurance coverage in Germany meant it had to draw on public funds of pound 30 billion for the bulk of damages.
For Spain, Fitch estimated that reconstruction following the country's devastating 2024 floods could amount to around 0.7 percentage points of GDP between 2024 and 2026.
The European Environment Agency estimated that climate adaptation needs in the transport, energy, and agriculture sectors will amount to between pound 53 billion and pound 137 billion annually through 2050, depending on the warming scenario, compared with currently committed financing of around pound 15 billion to pound 16 billion a year.
The European Central Bank said that expanding insurance and reinsurance coverage could reduce the transfer of losses to public finances, while European institutions are considering the establishment of joint mechanisms for reinsurance and disaster financing.