Allianz Trade: 2026 Heatwaves Cost Europe EUR 113 Billion

Allianz Trade has released a report estimating the economic impact of extreme weather events in 2026. The report highlights that heatwaves in Europe resulted in approximately EUR 113 billion in annual output costs across 30 countries, equivalent to about 0.46% of their combined Gross Domestic Product (GDP). This figure represents about 60% of the global extreme weather losses recorded in 2025. The estimates are based on each country's most intense five-day heat episode between June and August, adjusted for humidity and population exposure. Italy, Germany, and France account for nearly two-thirds of these estimated losses, while Cyprus faces the largest reduction in growth at 1.74 percentage points.

The report indicates that Europe was not alone in experiencing severe weather in 2026. Significant floods affected several African nations, including Madagascar, Malawi, Mozambique, South Africa, Zambia, and Zimbabwe, as well as Tunisia and Morocco. Indonesia faced an active wildfire season, and flooding along the Nepal-China border is estimated to require USD 4-5 billion in reconstruction costs. Peru declared emergencies due to both February floods and rainfall associated with El Niño.

Allianz Research has launched the annual Allianz Climate Economics Report (ACE) to examine how climate change impacts economic growth and inflation. The analysis utilizes the ClimRad (Climate Data Radar) platform, developed by Allianz Research and Earthian AI, to estimate the effects of changes in temperature, heat stress, drought, and precipitation on GDP and inflation. This approach allows for the assessment of costs beyond physical damage and insurance claims, including production losses and pressures on household purchasing power.

Globally, extreme weather events caused economic losses of USD 210 billion in 2025, a 32% decrease from the previous year but still 20% above the 2000-2019 average. The proportion of losses relative to the size of economies varied significantly. The United States recorded the largest absolute losses at USD 118.5 billion, equivalent to 0.4% of its GDP, while Jamaica's losses reached 39.4% of its GDP.

The disasters of 2025-2026 revealed a widening adaptation gap. Countries with established prevention systems, pre-arranged financing, and clear response mechanisms were better positioned than those relying primarily on post-disaster relief. The report emphasizes that resilience depends less on emergency spending after a disaster strikes and more on sustained prevention, pre-arranged financing, and clear responsibility beforehand.