Philipp Kusche Moderates Panel at EU Commission event discussing Cat Bonds as an EU Climate Risk Management Tool

As climate events increase in frequency and severity across Europe, there is an increasing need for robust, scalable, and innovative financial solutions to manage risk and support post-event recovery efforts. This was the backdrop at the recent “Insurance and access to finance for farm resilience and adaptation in the EU” event in which Howden’s landmark analysis, Insurance and Risk Management Tools for Agriculture in the EU, was published by the European Investment Bank and European Commission.   

The first of its kind report compiled data from all 27 Member States in the European Union (“EU”), revealing that agriculture already faces €60 billion in annual catastrophe risk from climate events. This figure is projected to rise to €90 billion by 2050 and calls for an urgent review of how the EU finances and manages these escalating losses.

At the event, Philipp Kusche, Chairman of Howden Capital Markets & Advisory, Europe and Co-Head of Global ILS, moderated a panel discussion centred on how market-based instruments such as catastrophe bonds (“cat bonds”) and reinsurance can enhance the EU’s risk management systems against mounting climate threats. Panellists included Dr. Jo Syroka, Director of New Markets at Fermat Capital Management, Michael Roth, Public Sector Practice Lead at Munich Re, and Florian Steiger, CEO and founder of Icosa Investments.

Kusche opened the session by discussing the evolution and expansion of the cat bond market.

“What began as a niche solution over twenty years ago has grown into a robust market of over $50 billion in capital, comprising part of the approximately $100 billion in alternative capital supporting the insurance industry today,” said Kusche.” Cat bonds are now increasingly used not just by private insurers and reinsurers, but also by corporations and public bodies, such as the World Bank’s active involvement in the market.”

Cat bonds, the panel agreed, are not a replacement but a complement to traditional reinsurance. They provide a vital mechanism to transfer high-severity, low-frequency risks to the capital markets, especially for perils that can strain the traditional insurance system.

The panellists cited precedent in using ILS to hedge exposures and support sovereign risk transfer while highlighting the importance of transparency, standardisation, and data to unlock broader investor participation.

The conversation turned to the findings of the EIB report, in which the EU has agreed to adopt a comprehensive, pre-arranged risk financing framework. These recommendations utilise tools like cat bonds, reinsurance, and mutual risk pools to shield agricultural economies from systemic shocks.

Howden’s data shows that the need for these market-based interventions is urgent, as farmers currently shoulder 70–80% of weather-related losses, forcing governments to provide unbudgeted assistance.

The report shows that drought poses the greatest threat to total agriculture losses across all EU regions. Over 50% of those industry losses are caused by drought alone.

Kusche outlined that while the current scope of cat bonds has primarily been natural disasters (e.g. hurricanes and earthquakes), there have been encouraging trends toward broadening their financial capabilities into areas such as terrorism and cyber and perils such as drought could also be considered. He also noted that investor appetite is keeping pace with market interest. Additionally, there is increasing interest from pension funds, sovereign wealth funds, and ESG-focused investors, especially in risks uncorrelated with traditional financial markets. The panellists agreed that structured, rules-based frameworks will be key to scaling solutions in data-scarce environments and could make it feasible for the EU to explore cat bond solutions.

Ultimately, the panellists agreed that as climate volatility is accelerating, Europe’s current insurance mechanisms will need to adapt to keep pace. However, with strong data, investor engagement, and public-sector coordination, catastrophe bonds and other financial mechanisms can build a faster, more resilient system for managing climate risk.

Please see here to explore the full findings and recommendations from the “Insurance and Risk Management Tools for Agriculture in the EU” report.