A major new report from the European Investment Bank and the European Commission put the cost of agriculture sector losses from adverse weather at €28.3bn a year with that rising to €46bn per year on average by 2050, under a business-as-usual scenario.

The probable maximum costs to the industry of a catastrophic year (a one-in-50-year event) could reach €90bn.

The current annual €28.3bn losses are made up of €17.2bn in crops, accounting for 6.4% of total crop production and €10.9bn in livestock, or 5.1% of livestock production. The report said that in general loss events are increasing in frequency, severity and duration.

The biggest threats outlined are from drought, frost and rain, with drought alone driving more than 50% of climate risk across the EU. The report noted that every region in the EU, with the exception of some parts of Ireland and Scandinavia, has seen reductions in average soil moisture since the 1960s. In fact, among all EU member states Ireland faced the lowest risk from drought while is one of the most at risk for crop losses due to rain.

The report, which is aimed at enhancing insurance cover for agricultural losses, notes that crop insurance has generally not been available in Ireland, an almost unique situation in the EU. It said that over the last ten years major crop losses have led to “ad hoc emergency compensation for farmers”. The report noted that in the wake of Storm Babet in 2023 €14m in post-event compensation was provided to farmers including €7m from the EU Agricultural Reserve Fund.

For comparison, in Italy there is €4bn planned from the 2023-2027 CAP through its risk management envelope which will subsidise crop insurance premiums by between 50% and 70%. There is a large existing crop insurance market in Italy with approximated €700m of premiums underwritten by 25 insurers in 2023.

The report also noted that products had been launched in France in recent years which allow farmers to insure against low grass growth on pastureland. France subsidises its farmers’ insurance costs by up to 70%.

Historically, insurance-related expenditure under the CAP only accounts for 1% of spending, a stark contrast to the US where 60% of expenditure under the Farm Bill allocated to insurance.

The report recommends that more is done to develop the insurance market for farmers across the EU, with enhanced use of risk-transfer measures including catastrophe bonds and public-private reinsurance arrangement. It also said the EU should provide rapid-response funding when disasters occur.

Finally, it recommended the agricultural sector as a whole should take more steps to adapt to climate change because, even with improved insurance coverage, those measures are critical for countering future climate risks.