July drought in Europe to cost at least €3.5bn, Aon

Drought and wildfires across Europe last month are set to cost a minimum €3.5bn in economic losses, with agriculture, forestry, water management and fisheries industries particularly hard hit, according to Aon.

The broker’s latest Global Catastrophe Recap report by its Impact Forecasting team reveals that a long-term rainfall deficit across northern Europe contributed to combined European drought losses in excess of €3.5bn ($4bn) during July.

According to various industry estimates, German farmers alone could face economic losses of €2.5bn ($2.9bn), the report states.

Across Europe, preliminary estimates of economic losses from harvest reduction and impacted forestry exceed multiple billions of US dollars, explained Impact Forecasting.

“Persistent drought and high temperatures that impacted the northern half of Europe will likely result in significant losses for local agricultural production. The meteorological pattern also generated favourable conditions for [the] spread of wildfires, which have been particularly severe in Sweden,” said Aon.

Sweden battled the most significant wildfire outbreak in its modern history last month, with damage exceeding $100m. Meanwhile, the deadliest European wildfire on record since 1900 devastated Mati, in the eastern Attica region of Greece, killing at least 92 people. The fire, and others in Attica, destroyed a minimum 905 structures and damaged a further 740, according to Aon.

Its report confirms that many countries around the world saw worsening drought-related and wildfire conditions during July, leading to hundreds of deaths and significant financial impact.

In California, the Carr Fire became one of top ten most destructive wildfires on record after igniting near Redding. It killed six people, destroying roughly 1,600 structures and damaging hundreds more. The total economic cost from the Carr Fire is expected to exceed $1bn, with insurance losses likely to cover most of the damage, said Aon.

Michal Lorinc, an analyst within Impact Forecasting’s Catastrophe Insight team, commented: “The month of July was marked by record-breaking heat, deepening droughts, and destructive wildfires in areas all around the globe. Nearly every major continent recorded some type of peril impact that will lead to a major cost to agricultural interests. In northern Europe alone, the cost to local farming interests is expected to result in a multibillion-dollar loss in harvest output. All eyes are on the looming possibility of an El Niño return by the end of the year, which could exacerbate these types of impacts.”

July also saw seasonal flooding in China, with aggregated economic losses nearing $1bn, according to Impact Forecasting. Meanwhile, historic rainfall in Japan caused significant flash flooding and mudslides, leaving at least 230 people dead or missing. The General Insurance Association of Japan reports that 48,000 insurance claims are in the pipeline at a preliminary cost of $711m.