Data released by the European Insurance and Occupational Pensions Authority in April reveal that between 50 % and 75 % of the economic losses caused by extreme weather events in the European Union are not covered by insurance. The uncovered portion translates into billions of euros of out‑of‑pocket expenses for households and businesses each year.

Scale of the gap

From 2021 through 2024 climate‑related disasters inflicted an estimated cumulative loss of roughly €200 billion across EU member states. Independent researchers project that, if current trends continue, annual losses could rise to €126 billion by 2029.

Regional hotspots

Southern and Western Europe are identified as the regions most exposed to these disasters, with a sharp increase in the frequency of severe events. In parts of Poland and Portugal flood‑risk insurance premiums have risen to levels that many households consider unaffordable, effectively rendering property uninsurable. Similar patterns are reported in other high‑risk zones where insurers are withdrawing coverage or setting prohibitive rates.

Economic impact on households and the state

The 2022 drought in Romania illustrates the scale of the protection gap: insurance paid for only 5 % of the damage, state aid covered 8 %, and the remaining €191 billion of losses were borne by households and businesses. Heather Grabbe, a senior fellow at the Brussels think‑tank Bruegel, warned that climate shocks can erase personal savings, depress consumer spending and increase pressure on the financial sector through unpaid loans, with the greatest impact often materialising years after the event. A series of droughts, heatwaves and floods last summer led to an estimated short‑term loss of €43 billion in the value of goods and services produced in the EU.

If national governments were required to finance all damage costs, the fiscal impact would be large enough to crowd out spending on adaptation measures such as flood defences, fire‑break networks and heat‑proofing of buildings.

Policy responses under discussion

Petra Hielkema, chair of EIOPA, warned that the protection gap means a single climate shock can lead to long‑term financial hardship for households. EIOPA has suggested creating an EU‑wide risk‑sharing pool that would allow insurers to spread exposure across borders and hazard types, with the aim of lowering premiums and extending coverage to high‑risk areas.

The industry body Insurance Europe cautioned that such a pool would only be viable if climate events remain largely confined within national borders, and warned that cross‑border pooling could create moral‑hazard incentives. Nevertheless, the principle of solidarity behind the pool aligns with the EU’s climate‑resilience agenda, which seeks to combine public investment with private risk‑transfer mechanisms.

Experts recommend defining high‑risk zones at the EU level and harmonising underwriting standards to create a level playing field for insurers and protect consumers.

What households can do

Heather Grabbe advocated for immediate governmental action to improve risk management, distribute the financial burden and fund adaptation projects. She suggested incentives such as lower insurance premiums for households that install flood barriers, improve insulation or adopt other green measures. Citizens are advised to invest in home‑adaptation measures and cooperate with local authorities on community fire and flood plans, noting that actions such as installing flood‑resistant doors, clearing roof vegetation and improving insulation may qualify for premium discounts under emerging green insurance products.

Public awareness of the insurance protection gap in Europe remains low, with many individuals uncertain about the coverage provided by their home insurance policies. The report concludes that without decisive action the cost of climate disasters will increasingly fall on households, reducing living standards and putting pressure on public finances.