Analysis-Europe’s heatwaves expose insurance gap as business losses mount

Europe's summer of unprecedented heatwaves has revealed a glaring insurance gap, as businesses suffer mounting losses. In Padua, Italy, the traditional evening aperitivo now often starts later, leaving outdoor terraces empty and cutting sales. Moody's estimates that last year's heatwaves cost €43 billion in lost economic output, but insurers only paid out €500 million in coverage.

Federica Luni, president of the APPE Padova hospitality association, says many businesses have seen turnover declines of around 20%, wiping out their margins. Insurers struggle to cover indirect operational disruption caused by heatwaves, which rarely result in physical damage like floods or storms. Heat acts as a compound risk, interacting with drought, wildfires, and water shortages, making it harder to model and insure.

While parametric insurance policies are emerging as a potential solution, many companies will need to adapt their operations, investing in cooling technologies and stress-testing supply chains to mitigate the growing economic impact of extreme heat.