The recent EU Commission event, "Insurance and Access to Finance for Farm Resilience and Adaptation in the EU," served as a platform to discuss innovative financial solutions for managing climate risks. Howden's analysis, "Insurance and Risk Management Tools for Agriculture in the EU," was unveiled during this event by the European Investment Bank and European Commission.
This groundbreaking report highlights that agriculture within the 27 Member States of the European Union faces an annual catastrophe risk of €60 billion due to climate events, a figure expected to rise to €90 billion by 2050. The report calls for urgent action on how these escalating losses are financed and managed.
Philipp Kusche, Chairman of Howden Capital Markets & Advisory, Europe, moderated a panel at the event. The discussion focused on market-based instruments like catastrophe bonds (cat bonds) and reinsurance as tools to bolster the EU's risk management against increasing climate threats. Panellists included Dr. Jo Syroka from Fermat Capital Management, Michael Roth from Munich Re, and Florian Steiger from Icosa Investments.
Kusche remarked on the evolution of cat bonds: “What began as a niche solution over twenty years ago has grown into a robust market of over $50 billion in capital.” He emphasized their growing use by various entities including private insurers, corporations, and public bodies such as the World Bank.
The panel agreed that cat bonds complement traditional reinsurance by transferring high-severity, low-frequency risks to capital markets. They stressed transparency, standardisation, and data as essential for broader investor participation.
The EIB report suggests adopting a comprehensive risk financing framework using tools like cat bonds to protect agricultural economies from systemic shocks. It notes that farmers currently bear 70-80% of weather-related losses.
Drought poses the greatest threat across all EU regions according to Howden’s data, causing over 50% of industry losses. Kusche noted trends toward expanding cat bond applications beyond natural disasters into areas like terrorism and cyber threats.
He also mentioned growing interest from pension funds and ESG-focused investors in uncorrelated risks with traditional markets. Structured frameworks could help scale solutions even where data is scarce.
Ultimately, panellists agreed that Europe’s insurance mechanisms must adapt quickly amid accelerating climate volatility. With strong data support and public-sector coordination, financial mechanisms like catastrophe bonds can enhance resilience against climate risks.