EU agriculture faces €28 billion annual average loss from extreme weather, projected to reach €40 billion by 2050, with most losses uninsured

London, 20 May 2025 – Howden announces the results and recommendations it produced for the landmark report “Insurance and Risk Management Tools for Agriculture in the EU” published by the European Investment Bank (EIB) and the European Commission. The ground-breaking analysis reveals that the European agriculture sector loses an average of €28 billion annually due to adverse weather, with losses projected to exceed €40 billion per year by 2050 under business-as-usual emissions scenarios.  

The study provides the most detailed and consistent financial and risk-based assessment to date of how climate change is impacting European agricultural production across the 27-nation EU and proposes urgent recommendations. It is the first EU-wide financial evaluation of the impact of climate risks to current and future crop yields, across multiple perils, using the essential risk metrics of annual average loss (AAL) and probable maximum loss (PML).  

Key findings

• Current annual average losses from climate risk – drought, precipitation, hail and frost - equate to 6.4% of EU crop yields rising to over 10% in the worst years.  
• By 2050, in a catastrophic year, EU-wide crop and livestock losses could exceed €90 billion, a 40% increase driven by climate change.  
• Drought accounts for over 50% of total agricultural losses and poses the greatest threat across all EU regions. 
• EU level data masks significant country variations. In the coming decades, projected catastrophic losses could reach €20 billion in Spain and Italy alone, with smaller economies in Central and South-Eastern Europe facing agricultural losses exceeding 3% of their GDP in extreme loss years.  
• As climate heating continues, earlier budding and flowering of vines and fruit trees will lead to more devastating losses to high value grapes and fruit crops from Spring frosts. Meanwhile, more frequent and intense storms will drive losses from hail and flooding.  
• Increasing attritional losses from frequent smaller events will add further pressure on farmers’ yields and profits and produce fewer ‘good years’ in which to build or maintain reserves.  

The protection gap

Only 20-30% of climate-related losses are insured via public, private or mutual systems, including by Europe’s Common Agricultural Policy (CAP). These averages mask stark disparities in crop and livestock insurance protection across EU Member States, including many cases where protection is non-existent. 

The study finds that pre-arranged protection, often supported by planned public subsidy, is usually far more effective for farmers and their lenders than unreliable, unplanned and unpredictable government funded bailouts.   

Recommendations 

To reduce systemic risk and limit economic shocks to farming communities and public finances, the report recommends streamlining data to enhance risk management, EU adoption of a suite of advanced risk-transfer mechanisms, including catastrophe bonds and public-private reinsurance arrangements, and scalable climate adaptation measures.  

The report recommends that the EU follow the path of other regional groups and governments by scaling up adoption of reinsurance and catastrophe bonds to protect EU budgets and provide pre-arranged, rapid-response funding when disasters strike, enabling faster recovery for farming communities. 

In addition, large-scale adaptation is key to sustaining subsidised insurance as risks rise, and essential in uninsured areas facing frequent losses. Policies should strengthen climate resilience at both farm and regional levels to maintain insurability. 

Luigi Sturani, CEO, Howden Europe, said: “Climate volatility is placing growing pressure on farmers and ultimately consumers. This report provides a clear call to action for EU agriculture and local governments to adapt. More robust forms of climate finance and establishing consistent risk quantification are essential to accelerating adaptation and ensuring future insurability of this essential sector.” 

Massimo Reina, CEO Howden Re International, added: “We are seeing growing interest from global reinsurers and capital markets to support EU agricultural resilience. Innovative financial mechanisms like catastrophe bonds and risk pooling can provide farmers, governments and the EU with the tools that they need to attract significant private sector capital to share in the risks and help secure our food systems.” 

EIB Vice-President Gelsomina Vigliotti said: “Climate-related risks are an increasing source of uncertainty for food production. Mitigating these risks through insurance and de-risking mechanisms is essential to support the investments of European farmers. The findings of this analysis will guide our future action as we step up support to bolster the resilience of the EU’s agricultural system.” 

The report was commissioned by the European Commission’s Directorate-General for Agriculture and carried out by EIB Advisory, under the fi-compass platform, with modelling, interpretation and recommendations by Howden and RiskLayer GMBH at Karlsruhe Institute of Technology. Lead authors include Dr Ana Gonzalez Pelaez (Howden), Professor James Daniell (Risklayer) and Rowan Douglas (Howden).