EIOPA Flags Extreme Heat as Leading Climate Risk for Life & Health Insurers

Key Takeaways

• Extreme Heat Leads the Risk: EIOPA identified extreme heat as the leading climate-related liability risk for life and health insurers and occupational pension providers.
• Heatwaves Are Already Deadly: Around 300,000 heatwave deaths have been recorded across Europe since 2000, representing roughly 97% of fatalities linked to extreme weather and climate events.
• Financial Effects Could Grow: Current impacts remain limited, but EIOPA expects the risks to become increasingly material as heatwaves become more frequent, intense and prolonged.
• Health Insurance Faces Particular Exposure: Medical expense, income protection and workers’ compensation insurance are among the lines projected to be most affected, alongside certain life and health products.
• Climate Assumptions Need Attention: EIOPA is urging insurers to account for emerging effects on mortality, morbidity and longevity within their broader climate risk assessments.

Deep Dive

Europe’s heatwaves are already killing people on a scale unmatched by any other climate-related hazard on the continent. The European Insurance and Occupational Pensions Authority now says the consequences are beginning to matter for the assumptions on which insurers and pension providers build their businesses.

In a report published September 30, EIOPA identified extreme heat as the leading climate-related liability risk facing life and health insurers and occupational pension providers. The financial effects remain limited for now, helped by public healthcare systems, diversification across insurance portfolios and other offsetting factors. EIOPA’s concern is what happens as the temperature keeps rising.

Since 2000, heatwaves have been responsible for roughly 300,000 deaths in Europe, accounting for about 97% of fatalities associated with extreme weather and climate events, according to EIOPA. Heatwaves are expected to become more frequent, more intense and longer-lasting over the coming decades. Under extreme scenarios, the authority said heat-related deaths could eventually reach levels comparable with those seen during the COVID-19 pandemic.

That is not simply a public health problem for the insurance industry. It reaches into mortality, morbidity and longevity, three of the assumptions that sit beneath life and health insurance and pension products.

The effects will not necessarily move in the same direction. Greater mortality and illness can increase liabilities for products exposed to death and health risks. Changes in longevity can work differently, potentially reducing some longer-term liabilities and partially offsetting those losses. The result depends heavily on the product, the portfolio and the population being covered.

Where the Exposure Sits

EIOPA developed an illustrative risk-scoring framework to get a better sense of where heatwave exposure could become most significant. The framework considers hazard, vulnerability and exposure and applies those measures across different countries, types of firms and lines of business. It largely follows an earlier EIOPA methodology developed to assess non-life insurers’ underwriting exposure to physical climate risks.

The exercise points to several areas where the effects could be particularly pronounced. In non-life insurance, EIOPA identified medical expense, income protection and workers’ compensation insurance among the lines expected to be most affected. Within life insurance, the authority highlighted similar-to-life health insurance and other non-participating life insurance.

For insurers exposed to mortality and health risks, more severe heatwaves are likely to put downward pressure on own funds. Longevity effects may provide some offset, although EIOPA cautioned against treating climate risk as uniform across products or portfolios.

Heat is also only part of the health story. More frequent wildfires and the possible spread of vector-borne diseases, including dengue and malaria, could add another layer of pressure as climatic conditions change. Those developments could alter morbidity and mortality patterns in ways that eventually find their way into claims experience, pricing assumptions and reserves.

The immediate numbers do not suggest a financial shock. That is precisely why the issue could be easy to underestimate. EIOPA said current impacts remain limited, but it expects their materiality to increase over time and is encouraging insurers to incorporate emerging climate-related health risks into their climate risk assessments, including both direct effects and broader macroeconomic consequences.

EIOPA Chair Petra Hielkema drew a contrast with the climate damage that is easier to see: flooded streets, burned forests and buildings torn apart by storms. Heat does not always leave behind the same photographs.

“The impact of heatwaves on human health is one of them,” Hielkema said, describing a less visible consequence of climate change that shows up more clearly in statistics. EIOPA’s preliminary work, she said, indicates that heat could become a material risk factor for certain insurance lines and pension providers even with diversification and other offsetting factors.

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