BRUSSELS, 30th July, 2026 (WAM) -- Europe is facing a growing challenge in containing the economic impact of climate-related natural disasters as wildfires, floods and heatwaves become more frequent, amid warnings that rising risks could render large parts of the continent uninsurable and place increasing pressure on governments and public finances.
The widespread wildfires that swept parts of France and Spain in recent days, forcing hundreds of thousands of people to evacuate their homes, have prompted European institutions to reassess disaster risk management mechanisms as insurers face mounting losses and home and property insurance premiums continue to rise.
The growing risk has prompted the European Central Bank and EU insurance regulator to call on Brussels to take a more active role by setting up an EU-level reinsurance scheme and a public natural disaster fund.
Extreme weather events already cost a fortune in repairs for Europe’s cash-strapped governments. Data from the European Environment Agency showed weather-related extremes cost the EU economy over €200 billion in economic losses between 2021 and 2024.
Insurance firms, meanwhile, are hiking their prices and even pulling out of certain at-risk areas, leaving governments and individuals to bear the cost of uninsured losses.
“In Europe, 75 percent of the damages related to natural disasters are not insured,” said Ariel Le Bourdonnec, a campaigner working on insurance at the NGO Reclaim Finance, citing data from the European Insurance and Occupational Pensions Authority. For insurers, flooding and storms are the most costly natural disasters, followed by extreme heat and wildfires, according to Insurance Europe.
In France, where a massive wildfire still burns in the south-west Gironde and Landes departments, the government has promised that insurance companies will cover the accommodation costs and the damages for over 200,000 people who have been evacuated.
In the Gironde department, around 130,000 workers are currently unable to work because of the wildfires, and 13,000 businesses have been evacuated.
Experts say the increasing frequency of natural disasters is widening the so-called "protection gap" as insurance costs rise and households and businesses become less able to afford premiums, potentially forcing governments to shoulder a greater share of losses and placing additional pressure on public budgets and sovereign debt.
The European Commission is expected to present a package of climate resilience and risk management measures later this year to strengthen climate resilience and risk management, including proposals to enhance financing mechanisms and risk-sharing arrangements among EU member states.