Europe’s wildfire insurance gap widens as heat intensifies

Relentless heat and another intense wildfire season are exposing a growing insurance gap across Europe’s most popular holiday regions, leaving many properties, tourism businesses and public authorities carrying the bulk of rising climate-related losses.

Record losses collide with limited insurance cover

Across Europe, the economic toll of extreme weather is climbing far faster than insurance coverage. Recent analysis by European regulators and the European Central Bank indicates that only about one quarter of weather and climate-related economic losses on the continent are insured, with the rest falling on households, companies and public budgets. The gap is particularly stark for natural catastrophes such as floods, heatwaves and wildfires, which are hitting southern Europe with growing frequency.

Published assessments from the European Environment Agency describe a rapid rise in losses from heat, drought and wildfires in southern member states, while central and eastern regions face mounting flood risks. Wildfire seasons have lengthened and intensified around the Mediterranean, with more days of extreme fire weather and larger burned areas in countries including Spain, Portugal, Greece and Italy. Recent seasons have seen evacuations of tourists from islands and coastal resorts, disrupted flights and closures of campsites and holiday parks at the height of the summer peak.

Despite these trends, technical material from the European Insurance and Occupational Pensions Authority highlights a persistent and widening “protection gap” for natural catastrophes. In previous years, analysis showed roughly three quarters of climate-related losses in Europe remained uninsured. Updated work released in 2026 reiterates that climate change is undermining traditional models of risk and that, without intervention, more assets will become either uninsurable or insured only at much higher cost.

Financial stability officials warn that this pattern carries implications beyond the insurance sector. As heatwaves and wildfires intensify, governments are increasingly called upon to fund recovery and adaptation measures, while households and small businesses in affected regions face greater income volatility. Tourism-dependent economies along the Mediterranean are especially vulnerable, since a single season of severe fires can damage both infrastructure and the long-term reputation of destinations.

Tourism hotspots face rising wildfire and heat risks

Southern Europe’s tourism belt is on the front line of shifting climate patterns. Recent fire seasons have affected islands and coastal areas in Greece, Spain, Portugal and Italy, with widely reported evacuations of hotels, beach resorts and campsites. Coverage of the 2025 European heatwaves notes that successive heat episodes combined with drought created ideal conditions for fast-moving fires, forcing thousands of residents and visitors to leave popular destinations in Crete and other islands.

In parallel, this year’s fire activity in France and Spain has already led to large-scale evacuations from resorts and countryside holiday villages, according to data collated from European forest fire monitoring systems and national civil protection agencies. Financial media analysis suggests that the direct costs of European wildfires in 2026 have already exceeded estimated average annual losses for the entire European Union, with additional indirect costs for tourism and local economies likely to emerge over time.

These events coincide with hotter, longer summers that are testing the limits of traditional holiday patterns. Publicly available assessments of recent heatwaves describe record or near-record temperatures in many parts of southern Europe, with red heat alerts covering dozens of cities at once. Health agencies underline that heat is now one of the leading weather-related killers in Europe, compounding the risks that visitors and seasonal workers face when fires break out near overburdened resorts.

For destinations whose economies depend heavily on summer arrivals, this presents a complex risk profile. On one side are the direct threats to hotels, rental villas, campsites and transport, and on the other are reputational concerns if images of smoke-filled beaches or stranded tourists dominate international news. The balance between maintaining visitor confidence and acknowledging the reality of escalating wildfire and heat risk is becoming more delicate each season.

Why southern Europe’s insurance gap is so large

Several structural factors contribute to the wildfire insurance gap in Europe’s holiday regions. In many Mediterranean countries, residential property insurance is not universally purchased, and natural catastrophe cover is often an optional extra rather than a standard feature. Where fire coverage exists, it may focus on building damage but not address business interruption, evacuation costs or prolonged loss of tourist income.

Regulatory and research material from European institutions shows significant variation in catastrophe insurance penetration across member states. Some northern and central countries have higher take-up of multi-peril property policies or public-private insurance schemes, while parts of southern and eastern Europe record much lower coverage rates. In some regions, less than 10 percent of climate-related losses are insured, leaving households and local authorities to absorb most of the impact when fires or heat-related disasters occur.

Insurers, for their part, are reassessing how to price risk in high-exposure zones. Technical reports point to climate change, land-use patterns and growing concentrations of assets in fire-prone coastal belts as drivers of rising expected losses. As extreme heat and drought persist, modelled probabilities of severe wildfire seasons increase, which can push insurers to raise premiums, tighten underwriting standards or impose higher deductibles for properties in forests or wildland-urban interfaces.

This dynamic can deepen the protection gap. As prices rise, lower-income households, small family-run hotels and campsites may reduce or drop coverage, particularly in rural or island communities. That, in turn, shifts more of the reconstruction and emergency response burden onto governments and the European Union, which already provide significant funding through civil protection mechanisms, cohesion policy and recovery instruments when major disasters strike.

EU and regulators test new tools to close the gap

Concern over the widening protection gap has moved higher on the European policy agenda. The European Environment Agency’s 2025 climate resilience assessment identifies escalating climate risks and calls for more systematic monitoring of adaptation efforts and residual risks. At the same time, the European Commission and member states have launched initiatives under the EU Strategy on Adaptation to Climate Change and the EU Mission on Adaptation to support better risk assessment, early warning systems and resilience investments, including for wildfires.

The European Insurance and Occupational Pensions Authority has developed a dashboard tracking natural catastrophe insurance gaps across member states and, together with the European Central Bank, has set out options to expand coverage. Discussion papers from these bodies outline frameworks in which private insurers, national governments and potentially EU-level backstops share the burden of extreme losses. One proposal explores a layered approach, where households and insurers absorb more frequent, lower-severity events, while very large catastrophes trigger pooled mechanisms or public support.

In June 2026, the Council of the European Union adopted a recommendation on strengthening preparedness and prevention for wildfires. The text promotes more integrated planning that aligns land management, climate adaptation, civil protection and forestry policy. It encourages member states to use EU tools such as the European Forest Fire Information System and other monitoring services to anticipate and manage cross-border fire risk, while also calling for better risk communication to residents and tourists.

Policy discussions increasingly link insurance to broader climate resilience. Supervisory priorities set out by EIOPA emphasise the role of insurers in promoting adaptation through pricing signals, contractual incentives for risk reduction and support for resilience investments. By rewarding measures such as fuel management, fire-resilient building materials and improved evacuation planning, insurers could help reduce expected wildfire losses and keep cover more affordable in high-risk holiday regions.

What it means for holidaymakers and local economies

For travellers, the growing wildfire and heat risk is beginning to reshape how trips are planned and insured. Consumer-facing guidance from insurers and travel industry bodies indicates that standard travel policies sometimes cover evacuation or trip cancellation when official orders or direct damage occur, but may not respond to smoke, poor air quality or general discomfort from extreme heat. In practice, coverage often depends on the precise wording of policies and the timing of events relative to booking dates.

Some insurers are introducing more detailed exclusions or conditions for trips to destinations facing repeated climate-related disruptions, while others are testing products that explicitly address climate risks. Observers note that this could create a patchwork of outcomes for travellers, with some enjoying robust protection and others discovering gaps only after an event. Industry advocates suggest that clearer disclosure and standardised definitions of covered perils would help consumers understand how wildfire and heat-related disruptions are treated.

For local economies, sustained wildfire seasons can deter investment and raise long-term questions about development models. Regions dependent on mass tourism may need to reconsider seasonality, diversify their visitor base or invest more heavily in adaptation measures such as shaded public spaces, upgraded firefighting capacity and resilient infrastructure. Publicly available economic studies suggest that, without stronger action, welfare losses from unchecked climate change in the European Union could run into hundreds of billions of euros annually by mid-century.

As Europe moves through another summer of intense heat and wildfires, the interaction between climate risk, insurance and tourism is coming into sharper focus. Whether the continent can expand coverage, strengthen resilience and sustain its role as a global holiday magnet will depend on how quickly policymakers, insurers, destination managers and travellers respond to the widening wildfire insurance gap.