Cyprus Faces EUR 2.5 Billion Climate Risk Threatening Public Finances with High Uninsured Damages
Cyprus is confronting a severe fiscal risk amounting to EUR 2.5 billion due to climate change, as revealed in the Fiscal Council’s 2026 interim report. The report highlights that 98% of the country's historical damages from extreme weather events between 1980 and 2024 remain uninsured, significantly higher than the EU average of 80.5%. This exposes Cyprus to substantial economic vulnerability and positions it among the EU member states with the lowest insurance coverage for climate-related damages.
The report also references a study by The Cyprus Institute that estimates over 70% of total adaptation needs, roughly EUR 2.5 billion, will require public funding. The physical economic cost of climate risks is projected to rise sharply from EUR 49.8 million in 2026 to between EUR 698.3 million and EUR 1.262 billion by 2050, affecting sectors such as energy, agriculture, tourism, and labor productivity.
To address these challenges, the Fiscal Council recommends embedding climate risk assessments into fiscal reports and establishing a disaster risk financing framework that combines preventive actions, fiscal buffers, private insurance, and support from national or European mechanisms. Notably, proposals from the European Central Bank and EIOPA include a public-private reinsurance system and a European disaster funding fund to mitigate these fiscal risks.
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