The European Union is being urged to increase insurance coverage to help farmers manage rising climate risks, according to a report from the European Investment Bank (EIB) and the European Commission.
The study projects that annual losses in the EU agriculture sector could increase by up to two-thirds by 2050 due to more frequent droughts and floods. Currently, extreme weather causes average annual losses of €28 billion across the 27 member states, representing about 6% of crop and livestock production.
Despite these challenges, only 20% to 30% of climate-related farm losses in the EU are covered by insurance schemes, whether public, private, or mutual, including those supported by EU agricultural subsidies.
European Commissioner for Agriculture and Food Christophe Hansen said climate change may further limit farmers’ access to finance, as lenders could become more cautious. He called on member states to develop new financial tools to support farmers and to focus on preventing climate risks in agriculture. The report indicates that insurance schemes supported by public funding tend to be more effective than government compensation programmes.
Jérôme Crugnola-Humbert, chair of the sustainability and climate-related risk committee at the Actuarial Association of Europe, noted that the issue involves not only the amount of insurance available but also which types of farming benefit from it. He observed that subsidies, and thus insurance, have often been linked to intensive farming practices, which can contribute to environmental pressures and climate change.
The report recommends expanding instruments such as catastrophe bonds, public-private reinsurance arrangements, and rapid-response funding to assist farmers in managing climate-related shocks.
Crugnola-Humbert cautioned that widespread use of catastrophe bonds for agriculture may take time due to limitations on risk transfer in capital markets. He suggested parametric insurance—where payouts are based on weather data rather than damage assessments—could be a more practical solution, citing its use in developing countries.
He also highlighted the need for an EU-level approach that aligns with existing national systems. However, EU rules on subsidies and competition may pose challenges to establishing new public-private partnerships needed to provide affordable insurance.
The EIB currently supports agriculture through loans, guarantees, and infrastructure projects such as irrigation and rural roads. It also advises on how EU farm grants can be used to attract additional funding to reduce risks.
EIB Vice-President Gelsomina Vigliotti said climate-related risks increase uncertainty for food production, making insurance and risk mitigation tools important to supporting farmers’ investments.
