A recent report, the first comprehensive financial assessment of climate change's impact on agriculture across the EU, reveals significant losses in crop and livestock production.

Currently, climate risk reduces EU crop yields by an average of 6.4% annually, with severe years potentially exceeding losses of 10%, leading to catastrophic losses that could total over €90 billion in a single year by 2050.

Drought is identified as the primary contributor, accounting for more than half of agricultural losses in the EU, alongside risks from hail, frost, and excessive precipitation.

Despite the severity of these risks, only 20-30% of climate-related agricultural losses are insured, highlighting a significant protection gap across EU member states.

Analysis from Howden indicates that farmers currently bear 70-80% of weather-related losses, while governments often provide unbudgeted emergency funding.

The report advocates for pre-arranged insurance with public subsidies as a more effective strategy for managing agricultural risks than reactive government bailouts.

To enhance resilience, the report recommends adopting advanced risk-transfer tools, improving risk assessment data, and expanding adaptation measures at both farm and regional levels.

Massimo Reina, CEO of Howden Re International, noted a growing interest from reinsurers in supporting EU agricultural resilience through innovative financial mechanisms.

Projections for catastrophic losses vary by region, with Spain and Italy potentially facing losses exceeding €20 billion in extreme years, while smaller Central and Southeastern European economies could see agricultural losses surpassing 3% of GDP.

The report highlights that climate change will alter crop development cycles, increasing the risk of frost damage, while storm-related losses from hail and flooding are also expected to rise.

EU Commissioner Christophe Hansen has urged member states to launch new financial instruments under the Common Agricultural Policy to better mitigate climate risks in agriculture.

The report supports policy recommendations for scaling up climate adaptation measures and expanding the use of reinsurance and catastrophe bonds to further mitigate risks.