The Impact of Extreme Weather Events on Agricultural Insurance in Europe

In Europe, climate change has a big impact on agriculture, due to an increase in the frequency and severity of extreme weather events. Many and prolonged droughts, heatwaves, floods, and hailstorms cause major economic losses that affect crop quality and generate instability in supply chains. In this study, we analyse the evolution of extreme weather events across Europe starting from the 1980s. The economic losses caused by extreme events were divided into three categories: heatwaves, frost, and fires; floods; and storms. In order to identify the trend and any shifts of the trend of the extreme weather events, we calculated moving averages over different periods: 5, 10, 20, and 30 years. The moving average analysis shows how climate change has altered from causing isolated and temporary economic losses to generate a consistent upward trend in losses, with an increasingly significant impact in the short, medium, and long term. In the second part of this study, we conducted a correlation analysis between the economic losses caused by extreme weather events and variations in property insurance premiums (fire and other property damage—which includes crop insurance premiums) and we calculated correlation coefficients directly, with a one-year lag, and with a two-year lag. Thus, we analysed whether insurance markets respond immediately to incurred losses or whether, depending on climate trends, there are delays in premium adjustments.