Heatwaves across Europe are inflicting economic losses that traditional insurance products largely do not cover, exposing a widening protection gap for businesses from Italian hospitality operators to manufacturers and payments firms, according to industry figures and insurer estimates.
European businesses face growing uninsured losses as heatwaves intensify
Heatwaves across Europe are inflicting economic losses that traditional insurance products largely do not cover, exposing a widening protection gap for businesses from Italian hospitality operators to manufacturers and payments firms, according to industry figures and insurer estimates.
Moody's has published estimates that last summer's European heatwaves cost €43 billion in lost economic output while generating only about €500 million in insured payouts. A survey of approximately 600 hospitality businesses in Padua and its surrounding province found more than 80 per cent reported turnover declines of around 20 per cent during a recent heatwave.
Europe is described as the fastest-warming continent. Reuters Climate Monitor data showed the average temperature across Western Europe was nearly 10 degrees Celsius above the 1961 to 1990 average on Aug 11. As of the time of the article's publication, Europe was experiencing its fifth heatwave of 2026.
A 2023 survey of 9,000 small and medium-sized firms conducted for Europe's insurance regulator found 28 per cent held business interruption cover as part of their property insurance, while 17 per cent had non-damage business interruption protection covering events such as strike action. Heat-related operational disruption typically falls outside such traditional policies.
Data compiled by environmental disclosure platform CDP showed 35 per cent of companies it tracks identified heatwaves as a risk driver, with manufacturing, services, infrastructure and food-related sectors most represented. Companies including Swedish shop-fitting provider ITAB Group, Italian cement producer Buzzi and French payments firm Worldline flagged a hit from hot weather or warned of its potential future impact in second-quarter earnings reports.
In response to the coverage gap, insurers are exploring parametric insurance products that pay out automatically when temperatures exceed predefined thresholds, without requiring a loss-adjustment process. The European market for parametric insurance is expected to reach US$7.93 billion by 2031, according to a report by KBV Research, with compound annual growth of 9.5 per cent between 2025 and 2032. Such policies are already in use in agriculture and industry experts see scope for expansion into transport and workforce protection.
- The source does not state how the Moody's estimate of €43 billion in lost economic output was calculated or what time period it covers beyond 'last summer.'
- The source does not state the methodology or sampling frame of the survey of approximately 600 Padua hospitality businesses.
- The source does not state whether any parametric heat insurance products are currently commercially available to retail or hospitality businesses in Europe, as distinct from agriculture.
- The source does not state the total current size of the European parametric insurance market against which the projected US$7.93 billion figure by 2031 would represent growth.
- The source does not identify which specific European insurance regulator commissioned the 2023 survey of 9,000 small and medium-sized firms.
- The source does not state the scale of earnings impact reported by ITAB Group, Buzzi, or Worldline in connection with extreme heat.
Read the original at The Straits Times