A fresh warning from Allianz Research underscores the deepening economic toll of Europe’s intensifying heatwaves, as wildfires sweeping across the Greek island of Crete force mass evacuations and raise urgent questions for insurers about climate adaptation, economic resilience and loss forecasting.
The Allianz report, released this week, warns that extreme summer temperatures could reduce European economic growth by as much as 0.5 percentage points in 2025. Spain, Italy and Greece are among the hardest-hit, with projected losses of close to 1 percentage point of GDP. The United States and China may also see declines of around 0.6 points.
The analysis draws an explicit link between heatwaves and industrial disruption, equating a single day above 32°C to half a day of nationwide strikes in economic terms. It further calls for structural adaptation in cities and workplaces to mitigate declining labour productivity, particularly in outdoor and temperature-sensitive sectors.
“Productivity losses due to heat can be mitigated,” the report stated, pointing to urban redesign, workplace protections and climate-resilient infrastructure as critical interventions.
The Allianz warning comes as hundreds of firefighters battle a fast-moving wildfire in southeast Crete, now considered one of the most severe blazes in Greece this year. Fanned by gale-force winds and soaring temperatures, the fire near Ierapetra has already prompted the evacuation of thousands of residents and tourists from at least five settlements, including the coastal areas of Achlia, Ferma and Agia Fotia.
More than 150 firefighters, supported by helicopters and specialised forest fire units, have been deployed in a round-the-clock effort to contain the flames, which have already destroyed homes, damaged infrastructure, and caused widespread power outages. At least four people have been hospitalised with respiratory problems. Emergency shelters have been set up, and hospitals across Crete have been placed on high alert.
The Greek fire service has issued a tactical withdrawal in some areas to protect personnel, prioritising the creation of firebreaks around vulnerable communities.
For insurers, the situation in Crete is a stark illustration of the mounting climate-exacerbated exposures facing Mediterranean countries—an increasingly common theme during Europe’s prolonged summer heatwaves. Wildfire risk, once seasonal and episodic, is now viewed as a structural peril that demands both risk engineering and pricing recalibration.
According to Allianz Research, southern Europe is bearing the brunt of the economic fallout. Spain stands to lose up to 1.4 percentage points of GDP in 2025 as a direct result of extreme heat. Italy, Greece, and even France are projected to suffer losses ranging from 0.3 to 1 percentage point, with Germany’s figure at 0.1. Globally, the study anticipates a 0.6-point drag on economic growth due to current and anticipated heat events.
These projections are informed in part by International Labour Organization (ILO) estimates that climate-related heat stress could reduce total potential global working hours by 2.2% by 2030.
For insurers and reinsurers, the implications go beyond weather-related claims. Persistent heat stress introduces long-term pressure on health systems, agricultural yields, industrial productivity, and the insurability of assets across multiple lines. As working hours fall and claims from climate-driven events increase, underwriters are being forced to rethink exposure models across sectors and geographies.
The situation unfolding in Crete follows similarly destructive fires in Turkey, Spain and Italy this week, as southern Europe faces yet another record-breaking summer. Spain and England have both logged their hottest Junes on record. Temperatures in mainland Portugal topped 46.6°C, while parts of France and Italy have activated maximum heat alerts.
The Allianz report does not mince words: without swift and meaningful adaptation, Europe’s economic performance will continue to falter under the strain of rising temperatures and increasingly frequent climate shocks.
For the insurance sector, the signal is unambiguous. Climate change is no longer confined to property claims and catastrophe bonds. It is a macroeconomic hazard—one that is burning its way into underwriting models, risk assessments and boardroom discussions.
