As Europe burns, insurers warn climate risk is now permanent

Europe's insurers, reinsurers and brokers say the wildfires tearing through Spain, France, Greece and even the UK aren't a one-off shock but a long-term shift in the continent's catastrophe risk. Axa, Allianz and Aon all warn that rising temperatures, now climbing twice as fast as the global average, are driving bigger losses and higher premiums, with historical data no longer reliable for pricing risk. Spain's 2025 wildfire season alone cost close to €5 billion, only a fifth of it insured. For South African insurers watching Europe's climate reckoning, it's a preview of how quickly "once-in-a-generation" disasters can become routine underwriting risk..By Alastair Marsh and Claudia Cohen.Europe’s insurers are bracing for a new era of catastrophe risk fanned by rising temperatures in the world’s fastest-warming continent.Insurers, reinsurers and brokers contacted by Bloomberg are already predicting increased premiums and bigger losses tied to natural catastrophes. Importantly, they don’t see the latest bouts of extreme heat as a temporary shock, but as a long-term trend.The industry is “actively evaluating” the extent to which the rise in temperatures “represents a fundamental shift in Europe’s catastrophe risk landscape,” said Will Bruce, global head of climate risk consulting for Aon Plc, the world’s second-largest insurance broker.Efforts are also underway to expand the “range of capital available to support resilience and recovery,” he said. That may require transferring more risk to the capital markets, “including catastrophe bonds and other insurance-linked securities.”.As Europeans struggle to adapt to a much hotter world than the one inhabited by their parents, they’re trying to comprehend not just a different physical reality, but also the financial burden that will likely accompany it. Munich Re says it’s now clear that the combined forces of El Niño and global warming have produced a “dangerous mix” that will drive up losses in the second half of this year.Wildfires — exacerbated by climate change — have already ravaged Spain, France and Greece. Even corners of Europe that used to consider themselves too far north to be at risk are now finding they’re affected. European forecasts show “very high” fire danger through early August reaching as far north as Scandinavia. In the UK, a large wildfire broke out close to a nuclear power station, as drought conditions were declared for London and half of England.Axa SA CEO Thomas Buberl said the French insurer is still trying to assess the impact of the fires as they continue to rage. “We have to live with the fact that these fires are happening more and more,” Buberl said in an interview on Bloomberg Television on Friday. “This is part of climate change, this is part of our daily reality now.” What is already clear is that wildfire losses extend well beyond damage to property, said Tyson Vickery, managing director and global placement leader for Europe at Marsh, the world’s largest insurance and risk-advisory broker. “Business interruption caused by evacuation orders, smoke or restricted access can create significant losses even where there is limited or no physical damage,” he said.And while it’s too early to say what the cost of this year’s wildfires will be, Vickery notes that Spain’s 2025 wildfire season resulted in close to €5 billion in economic losses, of which only €1 billion was insured.Allianz SE, Europe’s largest primary insurer, says heat is altering risk patterns in the region as temperatures rise twice as fast as in the rest of the world.There are now “more pronounced wildfire and drought risks driven by extreme weather and record temperatures,” said Matthias Trüstedt, global head of property & casualty at Allianz. He says the firm is working with clients to help protect them from losses. It’s a service that a growing number of insurers now offers.In Spain, Allianz has implemented an AI-powered satellite-based wildfire detection and alert service. As of July 20, the system had generated 417 wildfire alerts, triggered 73 response activations and enabled notifications to thousands of customers, Trüstedt said.But there are limits to how much such measures can achieve. In France, the population is still struggling to comprehend the scale of the damage.It’s clear that “we are now all exposed to all kinds of weather-related hazards,” says Stephanie Duraffourd, a spokesperson for one of France’s largest online insurance comparison websites, Assurland. “And no region is spared.”Duraffourd says risk levels will now be reassessed. There’ll be “more significant premium increases locally, but this also applies to the entire country,” she said.Roland Lescure, the French finance minister, has already said insurers will cover the cost of providing temporary housing for thousands of people evacuated due to wildfires. The decision, negotiated with the industry association France Assureurs, applies whether homes were damaged or not.Historical data no longer provide an adequate foundation on which to base loss probabilities, which is why the industry now relies “heavily” on forward-looking scenario analysis, Aon’s Bruce said. And Europe’s ability to generate reliable catastrophe risk models will play a key part in its efforts to attract investors to products such as cat bonds, he added.Catastrophe bonds are designed to help insurers offload unmanageable risks to the capital markets. Investors can be on the hook if a predefined catastrophe hits, but stand to make money if it doesn’t. And they only invest if they have reliable data on which to base their bets. Last year, the California FAIR Plan — the state’s insurer of last resort — entered the cat bond market with a wildfire bond. That followed the January 2025 fires that devastated the Los Angeles area and left the FAIR Plan facing an estimated $4 billion in losses.Globally, more than $5 billion of cat bonds with some level of exposure to wildfire risk were issued by insurers and sold to investors last year. That’s more than twice the level in 2024, with previous years seeing just a smattering of individual bond sales in the tens of millions of dollars.The Swiss Re Institute notes that wildfire is now the fastest-growing weather peril globally. “But additional risk-transfer capacity cannot replace measures that reduce the underlying risk to keep insurance affordable,” said Balz Grollimund, Swiss Re’s head of catastrophe perils.For now, wildfire risk isn’t covered under the state-backed public-private natural disaster compensation frameworks in Spain or France. That carries meaningful implications for how easily insurers can transfer risk, said Manuel Arrive, a credit analyst specialized in insurance at Fitch Ratings..Read more:.The Economist – The Arctic: Climate change’s great economic opportunity.“The question that arises is whether the state-backed natural catastrophe scheme should be extended to cover wildfires or other perils related to climate change,” he said. “In any case, there is a willingness on the part of European insurers to do so.”With climate-related losses currently expected to double every eight to nine years, Trüstedt at Allianz says Europe now “urgently” needs to focus protecting against losses in the first place, “rather than simply redistributing losses after they occur.”.© 2026 Bloomberg L.P..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. 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As Europe burns, insurers warn climate risk is now permanent

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