Europe’s wildfire insurance gap widens as heat intensifies

Relentless heat and intensifying wildfires across Europe’s Mediterranean fringe are deepening an insurance protection gap that is leaving hotels, small tourism operators and even holidaymakers dangerously exposed just as the peak summer travel season approaches.

Heatwaves Turn Summer Hotspots Into High-Risk Zones

Recent climate assessments for Europe indicate that heatwaves are becoming longer, hotter and more frequent, with the Mediterranean and southern Europe registering many of the continent’s most extreme temperatures in 2024 and 2025. Scientific analyses of the 2024 and 2025 summer seasons describe record or near-record heat in countries such as Greece, Italy, Spain and Portugal, conditions that have coincided with damaging wildfires in popular coastal and island destinations.

Reports from European climate monitoring services show that these heat extremes have pushed fire danger to “very high” or “extreme” levels for extended periods in much of the Mediterranean basin. An inaugural global State of Wildfires assessment by the European Commission’s Joint Research Centre highlighted that the European Union’s largest recorded wildfire occurred in Greece in 2023, underscoring the vulnerability of southern tourist regions to fast-moving blazes during prolonged hot spells.

Research on tourism fire exposure in the European Union identifies a strong overlap between regions of high wildfire hazard and areas with dense holiday infrastructure, particularly along Mediterranean coasts and islands. This means that each successive summer of severe heat does not only threaten forests and rural communities, but also the hotels, rental properties, tour operators and seasonal workers that underpin Europe’s beach and island tourism economy.

Insurance Protection Gap Widens Across Southern Europe

As physical risks rise, regulators and international organizations warn that Europe’s climate-related insurance protection gap is also widening. Analysis by the European Environment Agency on economic losses from weather and climate extremes shows that tens of billions of euros are lost each year across the continent, while only part of those losses are covered by insurance. Separate work by the European Central Bank and the European Insurance and Occupational Pensions Authority (EIOPA) concludes that households and businesses in several member states remain significantly underinsured for natural catastrophes such as wildfires.

EIOPA’s dashboard on natural catastrophe protection gaps indicates that wildfire insurance coverage is particularly patchy in many southern European countries. In markets where insurance against fire and natural hazards is not mandatory for households or small businesses, take-up rates are often low, especially among micro and small tourism enterprises that operate on tight margins. An OECD examination of insurance take-up in Italy, Portugal and Spain points to substantial wildfire exposure in regions reliant on tourism, while the share of insured assets remains modest compared with the level of physical risk.

At the same time, publicly available information from European institutions notes that the rising cost of claims from heatwaves and wildfires is beginning to feed through into higher premiums and tighter underwriting standards. This combination of escalating risk, limited penetration and rising prices is contributing to a deeper protection gap, particularly in coastal and island communities where tourism assets cluster along narrow strips of land close to flammable vegetation.

Tourism Businesses Face Rising Costs and Limited Cover

Studies commissioned within the European tourism sector highlight that climate change is already increasing insurance costs for hotels, resorts and tourism-dependent small and medium-sized enterprises. Analyses of recent crisis episodes in European destinations describe how extreme heat and wildfires disrupt operations, trigger mass evacuations and force last-minute cancellations, with many businesses discovering after the fact that their insurance policies do not fully cover loss of income, evacuation expenses or reputational damage.

Reports on the Greek island of Rhodes following the 2023 fires illustrate how exposed destinations can be when disasters strike at the height of the season. Thousands of holidaymakers were evacuated, and the Greek government subsequently introduced a voucher scheme offering “free” replacement stays in 2024 for affected visitors. Coverage in Greek and international media indicates that, while the scheme aimed to restore confidence, many tourists and local businesses viewed the compensation as partial at best, revealing limitations in both public and private protection mechanisms when tourism infrastructure is directly affected by wildfire.

Sector-wide reviews of crises in European tourism destinations further show that small operators, including family-run guesthouses, excursion providers and beach businesses, often rely on basic property policies with limited natural catastrophe extensions. Business interruption coverage is less widespread, and where it exists, it may be subject to narrow triggers or high deductibles. For destinations competing on price, passing higher insurance costs on to travelers is challenging, so underinsurance can become a default strategy even as risks mount.

Holidaymakers Discover Gaps in Personal Travel Protection

For individual travelers, wildfire risk has exposed gaps in standard travel insurance products. Consumer-facing guidance issued by European regulators and insurance associations notes that many policies only respond when official travel advisories are in place or when flights are canceled, leaving holidaymakers with limited recourse if they choose to abandon trips due to smoke, poor air quality or nearby fires that have not yet closed airports or resorts.

Accounts from recent summer seasons in Greece, Spain and Italy describe cases where travelers evacuated from resorts had their transport and accommodation rearranged by tour operators, but received little or no compensation for disrupted itineraries, extra expenses or lost pre-paid activities. In some instances, governments stepped in with ex post support measures, such as the Rhodes holiday vouchers, but these actions were discretionary and did not substitute for comprehensive, event-based travel insurance coverage.

Industry analyses suggest that demand for optional “natural catastrophe” or “cancel for any reason” add-ons remains relatively low, in part because many travelers underestimate wildfire risk in European destinations that are marketed as safe, familiar and well-regulated. As climate-related disruption becomes more common, consumer advocates are calling attention to policy fine print, especially exclusions related to known events, gradual environmental conditions and supplier insolvency following disasters.

Policy Debates Turn to Shared Solutions for Climate Risk

European policymakers are increasingly debating how to close the climate-related insurance gap without making coverage unaffordable for households, tourism businesses and local governments. A joint paper by the European Central Bank and EIOPA on the climate insurance protection gap outlines options such as public-private partnerships, multi-peril catastrophe pools, and incentives for risk reduction measures at property and community level.

The European Commission’s Climate Resilience Dialogue, which delivered final recommendations in 2024, emphasizes that narrowing the protection gap will require better data on local risks, clearer disclosure of insurance coverage limits and a stronger link between adaptation investments and insurability. Proposals discussed in this context include conditioning premium discounts or extended cover on measures such as creating defensible space around properties, upgrading building materials and improving evacuation planning in high-risk tourist zones.

At the same time, climate and tourism researchers argue that long-term resilience will depend not only on financial instruments but also on strategic choices about where and how tourism infrastructure is developed. Studies of wildfire trends in southern Europe suggest that continued expansion of hotels and second homes into fire-prone landscapes, combined with intensifying heat, could push certain regions toward recurring crisis unless planning, land management and insurance frameworks evolve in tandem.

As another summer of heatwaves approaches, travel industry bodies across Europe are urging members to reassess their catastrophe coverage, review contingency plans and communicate more transparently with guests about the realities of seasonal fire risk. With climate models pointing to further warming in the Mediterranean, the tension between Europe’s role as a global holiday magnet and its growing exposure to extreme heat and wildfires is likely to make the insurance gap a recurring headline for years to come.