European agriculture faces growing climate risks that EU can help counter, new study finds

This article is published in association with European Investment Bank.

• EU agriculture sector loses more than €28 billion a year as a result of adverse weather, according to new report
• Farm insurance in Europe can play key role to keep climate risks in check, says study published by EIB and European Commission
• EU can do more to expand insurance coverage for European farmers  

The European Union agricultural sector loses more than €28 billion a year, on average, as a result of adverse weather such as droughts and the EU can do more to reduce such business risks, including by expanding farm insurance, according to a groundbreaking new study.

The analysis, published jointly today by the European Investment Bank (EIB) and the European Commission, says that worsening climate change threatens to increase EU agricultural average annual losses as much as 66% by 2050, and urges a stronger EU risk-management system for the sector.

Only 20% to 30% of climate-induced farm losses in the EU are insured through public, private or mutual systems including those supported by Europe’s Common Agricultural Policy (CAP). Insurance coverage backed by public funding is often more effective than government compensation programmes, according to the study.

“Climate-related risks are an increasing source of uncertainty for food production. Mitigating these risks through insurance and de-risking mechanisms is essential to support the investments of European farmers,” said EIB Vice-President Gelsomina Vigliotti. “The findings of this analysis will guide our future action as we step up support to bolster the resilience of the EU’s agricultural system.”

The EIB Group to date has supported the EU farm industry in three main ways. One is loans and guarantees to agricultural businesses or equity stakes in them. The second is the financing of rural infrastructure such as irrigation and roads. The third is advice to public authorities and financial institutions on how EU farm grants can be used to attract funding from other sources and to limit risks included those related to climate.

Commissioner for agriculture and food, Christophe Hansen, said: “Climate change and its consequences could restrict farmers’ access to finance, as banks could become even more reluctant to take risks than they are today. The study we are publishing today with the EIB shows that only 20% to 30% of climate-related losses are insured by public, private or mutual systems. We need to do something to cover the remaining losses. I encourage all Member States to assess and launch new financial instruments under their CAP Strategic Plans, to better prevent climate risks in the agricultural sector. I also welcome the work of the EIB Group, which is playing a key role in mobilising capital to ensure the long-term resilience of the EU’s agri-food sector.”

The new study is the first-of-its-kind analysis of agriculture-insurance schemes across the EU. It was commissioned by the Commission’s Directorate-General for Agriculture and carried out by EIB Advisory, under the fi-compass platform, with the support of the global insurance intermediary group Howden.

Publication of the report coincides with an EIB-Commission conference in Brussels on Insurance and access to finance for farm resilience and adaptation in the EU.

Across the 27-nation EU, climate-induced losses for the agricultural sector average €28.3 billion a year, according to the study. That’s around 6% of annual EU crop and livestock production.

Global warming threatens to cause greater volatility in EU agricultural yields and more instability in European farm incomes, with projected losses rising between 42% and 66% by mid-century, according to the report.

It examines the broad impact of weather on agriculture and explores options for expanding farm insurance in Europe and for encouraging the sector to reduce risks through climate adaptation.

Main recommendations in the report include:

• To limit economic shocks for farmers, the EU should pursue risk-transfer measures including catastrophe bonds and public-private reinsurance arrangements
• The EU should provide rapid-response funding when disasters occur
• The sector as a whole should take more adaptation steps because, even with improved insurance coverage, they are critical for countering future climate risks.

Background information   

EIB 

The European Investment Bank (ElB) is the long-term lending institution of the European Union, owned by its Member States. The EIB finances investments in eight core priorities that support EU policy objectives: climate action and the environment, digitalisation and technological innovation, security and defence, cohesion, agriculture and the bioeconomy, social infrastructure, the capital markets union and a stronger Europe in a more peaceful and prosperous world.  

The EIB Group, which also includes the European Investment Fund (EIF), signed nearly €89 billion in new financing for over 900 high-impact projects in 2024, boosting Europe’s competitiveness and security.    

All projects financed by the EIB Group are aligned with the Paris Climate Agreement, as set out in our Climate Bank Roadmap. Almost 60% of the EIB Group’s annual financing supports projects that contribute directly to climate change mitigation, adaptation and a healthier environment.    

In addition to financing, the EIB offers advisory services that help public and private partners develop and implement high-quality, investment-ready projects. In 2024 alone, EIB advisory teams helped mobilise over 200 billion of investment across Europe and beyond.

High-quality, up-to-date photos of the organisation’s headquarters for media use are available here. 

About fi-compass

Delivered by EIB Advisory, fi-compass is a unique advisory platform established by the European Commission in partnership with the European Investment Bank (EIB). It is designed to support EU Member States and their managing authorities in the implementation of financial instruments under the European Shared Management Funds for Cohesion and Agriculture policy. The platform provides comprehensive guidance, practical know-how, and learning tools on financial instruments, helping to enhance the effectiveness and efficiency of public investments.

About Howden

Howden is a global insurance intermediary group with employee ownership at its heart. Founded in 1994, it provides insurance broking, reinsurance broking and underwriting services and solutions to clients ranging from individuals to the largest multinational companies.

The group operates in 55 countries across Europe, Africa, Asia, the Middle East, Latin America, the USA, Australia and New Zealand, employing 22,000 people and handling $45bn of premium on behalf of clients.