A new report produced by the European Investment Bank (EIB) and the European Commission, with input from insurance intermediary group Howden, highlights a significant protection gap in agricultural insurance across the European Union amid rising climate risks.
The study, Insurance and Risk Management Tools for Agriculture in the EU, examined the financial exposure of EU agriculture to climate-related perils such as drought, flooding, hail and frost.
According to the report, only 20% to 30% of losses from these events are currently covered through public, private or mutual insurance schemes, including those linked to the Common Agricultural Policy (CAP). In some member states, coverage is minimal or non-existent.
Annual average losses in the sector are estimated at €28 billion, with projections suggesting this could rise to over €40 billion by 2050 under current climate trajectories. In extreme years, the report estimated that total crop and livestock losses could exceed €90 billion, a 40% increase compared to current levels.
The findings also pointed to a growing mismatch between the scale of climate-related agricultural losses and the level of financial protection in place.
Drought was identified as the leading driver of losses, with mounting exposure across all EU regions. The report also highlighted the increasing impact of frequent, smaller events that place pressure on farm incomes and limit the ability to build financial reserves.
According to the report, greater use of structured insurance and risk-transfer mechanisms is needed to reduce the reliance on post-event government aid. It recommended that the EU adopt a broader suite of financial tools, including catastrophe bonds, public-private reinsurance arrangements and risk pooling structures. These approaches, the report said, can provide pre-arranged funding to support faster recovery and reduce fiscal shocks for both governments and farming communities.
Howden, which led on the insurance-related modelling and recommendations alongside RiskLayer GMBH, said more consistent data and clearer risk metrics are needed to support market development and attract private capital into the sector.
Meanwhile, the report also highlighted the importance of large-scale climate adaptation in sustaining insurance availability and affordability, particularly in high-risk and underinsured regions. The authors suggested that strengthening climate resilience at both farm and regional levels will be critical to maintaining long-term insurability. They also called for policy changes to support the expansion of insurance markets, including subsidy models aligned with pre-disaster protection rather than reactive support.
The report was commissioned by the European Commission’s directorate-general for agriculture and developed under the fi-compass platform.
