Research Center: Climate disasters put pressure on European Union budgets and require comprehensive reforms
Brussels, June 22 / WAM / The Bruegel International Research Center in Brussels warned that climate disasters have become an increasing structural burden on national budgets in the European Union, in light of increasing economic losses and weak insurance coverage, which is pushing towards demands for profound reforms in risk management.
According to the report, direct economic losses resulting from climate disasters in the European Union amounted to about 822 billion euros between 1980 and 2024, with a large percentage of them recorded during the last four years. These figures do not include indirect costs such as declining industrial productivity, disruption of supply chains, and high health burdens, which may exceed direct damages five times.
The report indicated that European governments are increasingly forced to play the role of “last insurer” as a result of the weak spread of private insurance, which leads to them resorting to unexpected and emergency financial funds to confront the repercussions of extreme climate events.
Case studies revealed a great disparity in the responses of European countries, as the floods in Western Europe in 2021 showed that countries relied more on insurance, while countries such as Germany were forced to rely on slow public financing, while in Slovenia and Romania, the absence of comprehensive insurance coverage led to individuals and farmers bearing the bulk of the losses, while the public insurance system in Spain (CCS) helped to mitigate the shock, despite its limitations in the face of recurring disasters.
The report called for adopting an integrated European strategy for climate resilience, based on a shift towards proactive adaptation by investing in early warning systems and natural solutions such as floodplains, which could save hundreds of billions of euros in future losses.
He stressed the need to bridge the insurance gap by imposing insurance on some assets or linking it to obtaining state aid, in addition to restructuring government support so that compliance with “build back better” standards is required to reduce future risks.
He proposed the establishment of European supranational risk-sharing mechanisms, including a European fund dedicated to natural disasters supported by lending mechanisms, which would reduce the burden on member states and reduce insurance costs by taking advantage of economies of scale.
The report stressed that integrating climate resilience indicators into the European Union’s economic governance mechanisms, such as the European Semester, has become necessary to ensure the sustainability of public finances in the face of increasing environmental shocks.
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