According to the interim report for 2026 of the Fiscal Council, the historical uninsured rate of direct potential economic losses from extreme weather and climate events is estimated at 98% for the period from 1980 to 2024.

The average in the EU is 80.5%. Cyprus is thus among the Member States with the lowest insurance coverage for such losses or disasters. In its report, the Fiscal Council warns of a EUR 2.5 billion “climate bomb”.

In contrast, in countries such as Denmark, the Netherlands and Belgium, the uninsured rate hovers around 35%, which shows how different the protection of citizens and states can be when private insurance plays an essential role.

The report refers to a study by the Cyprus Institute, based on which it is estimated that over 70% of the total needs, i.e. approximately EUR 2.5 billion, should be financed from public resources. The Fiscal Council points out some important clarifications. The amount concerns investment needs for adaptation and does not include possible additional operating costs that climate change may cause. It expresses the overall investment need of the economy and should not be fully identified with future public expenditure.

To avoid fiscal derailment, the Council recommends two parallel policy directions. The first concerns the integration of a systematic assessment of climate risks into the annual Fiscal Risk Report. The assessment should include the exposure of public infrastructure, alternative damage scenarios, the likely time horizon, the expected and extreme fiscal impacts and their link to the Budget and the trajectory of the CPI. The second concerns the development of an ex-ante framework for financing catastrophic risks. According to the report, this framework could combine prevention and adaptation measures, an adequate fiscal buffer for more frequent events of limited magnitude, private insurance and reinsurance for intermediate levels of damage, and national or European support mechanisms for exceptionally large events.

The message of the report is clear: when almost all losses from extreme events remain uninsured, the burden ultimately falls on public finances and, by extension, on taxpayers. Strengthening the role of private insurance and reinsurance appears to be a key element of the response.

Source: cyprusinsurancenews