Europe’s increasingly frequent heatwaves are causing major financial losses for businesses, while traditional business interruption insurance often fails to cover the disruption. In Italy’s Padua, hospitality businesses have seen customers avoid outdoor dining during peak heat, with more than 80% of surveyed businesses reporting turnover declines of around 20%.

The economic impact is significant. Moody’s estimates that last summer’s European heatwaves caused around €43 billion in lost economic output, compared with only about €500 million in insured payouts. Extreme heat is also affecting worker productivity, transport, agriculture and industrial operations, while increasing cooling and operating costs.

Insurers are exploring parametric insurance as one possible solution, with payouts triggered automatically when temperatures cross predefined thresholds. However, experts say businesses will also need to adapt by investing in cooling systems, redesigning workplaces and strengthening supply chains to reduce losses from increasingly frequent extreme heat.

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