One in 10 large European companies mentioned extreme heat on earnings calls - and less than 2% of that loss is insured
One in 10 European companies with a market value above US$1 billion mentioned extreme heat, drought, or wildfires on their earnings calls in recent weeks - a record share, according to data from research platform AlphaSense as reported by the Financial Times. The companies span sectors from appliance manufacturers and pool equipment suppliers to nursing home operators, engineers, and utility providers.
For brokers placing commercial lines cover on large European businesses and their UK operations, the pattern of these disclosures carries a specific message. Heat is now a named business risk at the earnings call level for a record share of large European companies. Almost none of it is insured.
The FT reported that European companies are split on whether this summer's conditions represent a structural shift or an unusual event. Several executives told analysts they were adapting their businesses by investing in air conditioning, changing product lines, and revising working practices. Others described the heat as a one-off with no lasting impact on their model.
That division is itself the insurance signal. A company treating extreme heat as a named earnings risk and investing in adaptation carries a different risk profile to one that does not. French companies are leading disclosure volumes this quarter, well ahead of Germany, Spain, Italy, and the UK. The UK's position at the bottom of the European disclosure table is worth noting: it may reflect lower physical heat exposure relative to southern European peers, or a lag in how UK companies recognise and report heat as a material business risk. Either way, it does not reflect lower insurance market exposure to the underlying problem.
Moody's has published estimates that Europe's 2025 heatwaves cost €43 billion (approximately US$50 billion) in lost economic output while generating only about €500 million in insured payouts - a coverage ratio of less than 2%. It is worth noting that the €43 billion figure, drawn from a University of Mannheim and European Central Bank study, covers heatwaves, drought and flooding together affecting about a quarter of EU regions, not heat alone. The insured-to-uninsured ratio remains striking regardless of the precise breakdown.
The ratio reflects a structural problem with how traditional business interruption policies respond to heat. Most BI cover requires physical damage to interrupt operations before a claim can be made. Extreme heat can cut revenue, reduce worker productivity, raise operating costs, and disrupt supply chains without any physical damage threshold being met. A 2023 EIOPA survey of approximately 9,000 small and medium-sized firms found 28% held BI cover within their property insurance. Only 17% had non-damage BI protection covering indirect interruptions. Companies experiencing heat-related revenue losses are largely absorbing them without insurance support.
UK-based brokers placing cover on multinational clients or UK businesses in sectors flagging heat on earnings calls face three questions at renewal.
The first is whether the client's BI policy requires a physical damage trigger. Many do. A client whose revenue falls because workers cannot operate safely at full capacity during a prolonged heatwave may have no BI claim even if the financial impact is material. The same applies if consumers avoid the client's premises at peak heat - a pattern Moody's notes is already measurable in hospitality revenue data across southern Europe and now beginning to appear in UK commercial earnings disclosures.
The second is whether supply chain cover accounts for heat-driven disruption upstream. Several companies in the FT's reporting noted that heat affected their suppliers and logistics as well as their own sites. Contingent BI cover varies widely in how it treats indirect, non-physical supply chain interruptions.
The third is the adaptation gap. Companies that have invested in cooling or restructured their supply chain around heat resilience are better risks than those that have not. The FT data shows that distinction is already visible in earnings disclosures. Underwriters are likely to start asking about it at renewal.
Reuters reported that Aidan Kerr, head of UK and Ireland public sector solutions at Swiss Re, said parametric insurance is being explored to address heat losses that fall outside conventional indemnity cover. Parametric policies pay when a defined trigger condition is met - typically a temperature threshold sustained for a set period - without requiring proof of physical damage.
For brokers with clients in hospitality, outdoor retail, construction, or logistics, parametric cover is worth raising alongside existing BI wordings. It requires careful structuring of the trigger to avoid basis risk: a policy that pays when a nearby weather station records 35°C for three consecutive days needs to reflect the actual temperature at the insured premises closely enough to produce a payment that tracks the real economic loss. That structuring conversation is a specialist one, but it is a conversation the Moody's protection gap data makes increasingly hard to avoid.
