Allianz Research has launched the Allianz Climate Economics Report (ACE), an annual flagship examining how climate change affects economic growth and inflation. The analysis draws on the ClimRad (Climate Data Radar) platform, a proprietary tool developed with Earthian AI that utilises Copernicus ERA5 and ERA-Land datasets. Alongside catastrophe records, ClimRad provides in-house damage functions to estimate how temperature changes, heat stress and drought affect annual real GDP per capita growth. The report review previous year’s conditions, assesses current developments and provides a three-year perspective on climate risks and their macroeconomic effects.

Global climate trends in 2025

Global temperatures eased slightly in 2025 to 18.5°C from 18.8°C in 2024, yet the anomaly remained +1.38°C above the 1950–1970 baseline. Extreme weather caused USD210bn in economic losses in 2025, which is 20% above the 2000–2019 average. Insured losses reached USD79bn, raising the insured share of total losses to 38%. Annual totals were highly sensitive to major catastrophes, such as the January 2025 Los Angeles wildfires, which alone generated nearly USD60bn, or 28% of the year’s recorded losses. Geographically, Asia Pacific accounted for 38% of events, but North America generated approximately 58% of reported monetary losses. Analysis confirms that warmer years are associated with more frequent disasters; drought frequency ratios range from 1.26 to 1.31 across all regions.

Country-level climate risk in 2025

Climate risk became more geographically differentiated in 2025. Northern and Eastern European countries moved sharply up global temperature-anomaly rankings, led by Norway with an anomaly of +3.74°C. Slovakia, Lithuania, and Slovenia also climbed over 130 places in rank since 1980. The report utilizes a Climate Change Score (CCS) to measure departures from historical norms and a Climate Stress Score (CSS) to capture absolute severity. Nigeria recorded the highest CSS at 0.94, while Indonesia reached the highest CCS at 0.95. High event activity was concentrated in a small group of countries, with the United States recording 30 events, followed by India with 14 and China with 11. Large economies like China can absorb substantial monetary losses (USD19.8bn) that appear small relative to GDP (0.1%).

2026 climate event deep dive: Europe’s summer heatwaves

Europe’s 2026 heatwaves resulted in an estimated annual output cost of EUR113bn across 30 countries, equivalent to 0.46% of their combined projected GDP. Italy, Germany and France accounted for almost two-thirds of these monetary losses. The assessment highlights that air temperature alone is an insufficient metric for economic exposure; humidity plays a critical role in heat stress. Italy’s more humid heat episode was associated with a larger estimated growth loss (1.19pp) than Hungary’s hotter but drier conditions (0.51pp). Cyprus faced the largest proportional burden with a growth impact of 1.74pp, translating to approximately EUR0.7bn or 1.7% of its projected annual GDP.

The 2027 climate risk outlook

A very strong El Niño is projected to peak in late 2026 and persist into early 2027, potentially costing the global economy USD451bn. This represents a net output loss equivalent to 0.24% of projected GDP across 144 economies. China, the US and India are expected to account for nearly 60% of gross losses, with estimated impacts of USD147bn, USD91bn and USD50bn respectively. Proportional declines are sharpest in South Korea at 0.51% and Indonesia at 0.41%. The inflationary effects are broader than output effects, with global headline inflation expected to rise by 0.42 percentage points (pp) and food inflation by 0.65pp. For the EU-27, the corresponding increases are 0.31pp for headline inflation and 0.50pp for food prices.

Adaptation responses to major climate events in 2025–2026

The disasters of 2025–2026 exposed a widening adaptation gap. Countries with established prevention systems, such as Australia, Chile and Canada, were better positioned due to pre-arranged financing and clear response mechanisms. Morocco’s flood response benefited from a USD408mn World Bank-backed resilience programme. In contrast, countries like Mexico and Bolivia remained focused on post-disaster relief and reconstruction. Europe faces challenges with an insurance protection gap, as only 25% of NatCat losses are typically insured. Initiatives like the EIB water-resilience facility of EUR15bn for 2025–2027 aim to address these risks. The report concludes that resilience depends less on emergency spending after a disaster strikes than on sustained prevention and risk-informed spatial planning.