German Economy Anticipates €25 Billion Loss from 2026 Heat Wave

The Allianz Climate Risk Tracker highlights how heat waves contribute to economic losses across Europe, mainly through decreased labor productivity, increased break times, and infrastructure strain.

Frank Sommerfeld, CEO of Allianz Insurance AG, stated that heat is often underestimated as a risk, stressing that it pressures people, infrastructure, and the economy. It also worsens existing issues such as drought, forest fires, and severe weather conditions.

Over the past five years, extreme weather events in Germany have resulted in economic losses totaling around €50 billion, nearly double the annual average from 2000 to 2019. Insured losses increased significantly, jumping 80% to nearly €17 billion annually, compared to an average global increase of 76%. During this time, about 33.5% of these losses were covered by insurance.

The study noted that Germany is not adequately prepared for heat waves, making the economic impact more pronounced than in many other European nations. Overall, the estimated heat-related economic losses across the countries analyzed reach €113 billion, with Germany suffering the second-highest losses in Europe, following Italy's €28 billion and ahead of France's €20 billion.

The study also examined the potential economic consequences of a strong El Niño phenomenon, referencing patterns observed during the previous 2023/24 event. It found that El Niño could lead to around €392 billion ($451 billion) in lost economic output worldwide next year, with China, the U.S., and India responsible for almost 60% of the gross losses. In Europe, the 27 EU member states could face losses of approximately €21 billion ($24 billion) due to El Niño, equating to roughly 0.9% of GDP, with an expected impact of 0.31 percentage points on inflation and 0.5 percentage points on food prices.

Allianz and Allianz Trade recommend that adaptation measures, including early-warning systems, risk mapping, forward financing, and clear responsibilities, should be enhanced to mitigate the impacts of El Niño, heat waves, and other extreme weather events. Hazem Krichene, a senior climate economist at Allianz, emphasized the importance of timely investment in adaptation and prevention efforts, arguing that proactive measures are more economically sensible than the rising costs associated with repairing damage after it occurs.