Economy
Backlash grows over Trump administration’s probe of Fed Chair Powell
Condemnations and criticism grew on Monday after the Trump administration decided to open a criminal investigation into Federal Reserve Chair Jerome Powell, with the defenders of the U.S. central bank pushing back against President Donald Trump’s efforts to exert more control over the Fed.
The backlash reflected the overarching stakes in determining the balance of power within the federal government and the path of the U.S. economy at a time of uncertainty about inflation and a slowing job market. This has created a sense among some Republican lawmakers and leading economists that the Trump administration had overstepped the Fed’s independence by sending subpoenas.
The criminal investigation – a first for a sitting Fed chair – sparked an unusually robust response from Powell and a full-throated defense from three former Fed chairs, a group of top economic officials and even Republican senators tasked with voting on Trump’s eventual pick to replace Powell as Fed chair when his term expires in May.
Many of the world’s major central banks also threw their support behind the Fed and Powell, saying in a joint statement Tuesday that it was “critical to preserve” their independence.
The heads of the European Central Bank, the Bank of England, the Bank of Canada and eight other institutions said Powell had acted with integrity and that central bank independence was crucial for keeping prices and financial markets stable.
“We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell,” the central bankers said in a rare joint statement.
“The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve.”
Other signatories included the central bank chiefs of Sweden, Denmark, Switzerland, Australia, South Korea, Brazil and France, as well as top officials at the Bank for International Settlements, a central bank umbrella body. The Bank of Japan was notably absent from the list.
White House press secretary Karoline Leavitt told reporters that Trump did not direct his Justice Department to investigate Powell, who has proven to be a foil for Trump by insisting on setting the Fed’s benchmark interest rates based on the data instead of the president’s wishes.
“One thing for sure, the president’s made it quite clear, is Jerome Powell is bad at his job,” Leavitt said. “As for whether or not Jerome Powell is a criminal, that’s an answer the Department of Justice is going to have to find out.”
Critics see Trump as trying to control Fed
The investigation reveals the extent to which the Trump administration is willing to go to assert control over the Fed, an independent agency that the president believes should follow his claim that inflationary pressures have faded enough to warrant drastic rate cuts.
Trump has repeatedly used investigations – which might or might not lead to an actual indictment – to attack his political rivals.
The risks go far beyond Washington infighting to whether people can find work or afford their groceries. If the Fed errs in setting rates, inflation could surge, or job losses could mount. Trump maintains that an economic boom is occurring and rates should be cut to pump more money into the economy, while Powell has taken a more cautious approach in the wake of Trump’s tariffs.
Several Republican senators have condemned the Department of Justice’s subpoenas of the Fed, which Powell revealed Sunday and characterized as “pretexts” to pressure him to sharply cut interest rates. Powell also said the Justice Department has threatened criminal indictments over his June testimony to Congress about the cost and design elements of a $2.5 billion building renovation that includes the Fed’s headquarters.
“After speaking with Chair Powell this morning, it’s clear the administration’s investigation is nothing more than an attempt at coercion,” said Sen. Lisa Murkowski, R-Alaska, on Monday.
Jeanine Pirro, U.S. attorney for the District of Columbia, said on social media that the Fed “ignored” her office’s outreach to discuss the renovation cost overruns, “necessitating the use of legal process – which is not a threat.”
“The word ‘indictment’ has come out of Mr. Powell’s mouth, no one else’s,” Pirro posted on the social media platform X, although the subpoenas and the White House’s own statement about determining Powell’s criminality would suggest the risk of an indictment.
A bipartisan group of former Fed chairs and top economists on Monday called the Trump administration’s investigation “an unprecedented attempt to use prosecutorial attacks” to undermine the Fed’s independence, stressing that central banks controlled by political leaders tend to produce higher inflation and lower growth.
“I think this is ham-handed, counter-productive, and going to set back the president’s cause,” said Jason Furman, an economist at Harvard and former top adviser to President Barack Obama. The investigation could also unify the Fed’s interest-rate setting committee in support of Powell, and means “the next Fed chair will be under more pressure to prove their independence.”
The subpoenas apply to Powell’s statements before a congressional committee about the renovation of Fed buildings, including its marble-clad headquarters in Washington. They come at an unusual moment when Trump was teasing the likelihood of announcing his nominee this month to succeed Powell as the Fed chair, and could possibly be self-defeating for the nomination process.
While Powell’s term as chair ends in four months, he has a separate term as a Fed governor until January 2028, meaning that he could remain on the board.
Some Senate Republicans express doubts
Powell quickly found a growing number of defenders among Republicans in the Senate, who will have the choice of whether to confirm Trump’s planned pick for Fed chair.
Sen. Thom Tillis, a North Carolina Republican and member of the Senate Banking panel, said late Sunday that he would oppose any of the Trump administration’s Fed nominees until the investigation is “resolved.”
“If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said.
Sen. Dave McCormick, R-Pa., said the Fed may have wasted public dollars with its renovation, but he said, “I do not think Chairman Powell is guilty of criminal activity.”
Senate Majority Leader John Thune offered a brief but stern response Monday about the tariffs as he arrived at the U.S. Capitol, suggesting that the administration needed “serious” evidence of wrongdoing to take such a significant step.
“I haven’t seen the case or whatever the allegations or charges are, but I would say they better, they better be real and they better be serious,” said Thune, a Republican representing South Dakota.
Powell could stay on Fed board, possibly thwarting Trump
If Powell stays on the board after his term as chair ends, the Trump administration would be deprived of the chance to fill another seat that would give the administration a majority on the seven-member board. That majority could then enact significant reforms at the Fed and even block the appointment of presidents at the Fed’s 12 regional banks.
“They could do a lot of reorganizing and reforms” without having to pass new legislation, said Mark Spindel, chief investment officer at Potomac River Capital and author of a book on Fed independence. “That seat is very valuable.”
Powell has declined at several press conferences to answer questions about his plans to stay or leave the board.
Scott Alvarez, former general counsel at the Fed, says the investigation is intended to intimidate Powell from staying on the board. The probe is occurring now “to say to Chair Powell, ‘We’ll use every mechanism that the administration has to make your life miserable unless you leave the Board in May,'” Alvarez said.
Asked on Monday by reporters if Powell planned to remain a Fed governor, Kevin Hassett, director of the White House National Economic Council and a leading candidate to become Fed chair, said he was unaware of Powell’s plans.
“I’ve not talked to Jay about that,” Hassett said.
Weaker Fed could mean weaker economy
A bipartisan group of former Fed chairs and top economists said in their Monday letter that the administration’s legal actions and the possible loss of Fed independence could hurt the broader economy.
“This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly,” the statement said.
The statement was signed by former Fed chairs Ben Bernanke, Janet Yellen and Alan Greenspan, as well as former Treasury Secretaries Henry Paulson and Robert Rubin.
Still, Trump’s pressure campaign had been building for some time, with him relentlessly criticizing and belittling Powell.
He even appeared to preview the shocking news of the subpoenas at a Dec. 29 news conference by saying he would bring a lawsuit against Powell over the renovation costs.
“He’s just a very incompetent man,” Trump said. “But we’re going to probably bring a lawsuit against him.”
Istanbul Airport has set new records for daily flights and passenger traffic, Transport and Infrastructure Minister Abdulkadir Uraloğlu said Monday.
Türkiye’s largest airport and one of the biggest civil aviation hubs in the world handled 1,739 flights and 290,287 passengers on Sunday.
The figures marked the highest number of daily flights and passengers ever recorded at an airport in Türkiye and Europe, Uraloğlu said in a statement.
The passenger count renews Istanbul Airport’s previous peak of 289,732 reported on the same day a week ago.
The new records further strengthen Istanbul Airport’s position as a major international aviation hub, Uraloğlu said.
“Istanbul Airport is among the world’s leading airports with its capacity, strong infrastructure and quality of service,” he noted.
“These new records once again demonstrate that our airport is further strengthening its position as a global transfer hub.”
The gleaming glass-and-steel structure along the Black Sea coast turned into one of the most important transit centers in aviation since it became fully operational in April 2019.
The hub can handle 90 million passengers a year in the current phase. The figure is nothing compared to its potential capacity to serve 200 million after completing all phases.
Istanbul Airport served record-breaking 84.4 million passengers in 2025, making it the second-busiest airport in Europe after Heathrow Airport and the eighth-busiest worldwide. It seeks to reach the 90 million mark this year.
Sabiha Gökçen also sets passenger record
Across the city, Türkiye’s second-largest airport also recorded its highest-ever daily passenger traffic on the same day.
Sabiha Gökçen International Airport said it had handled 180,914 passengers across 958 flights on Sunday.
It said it saw new daily records for international arriving and departing passengers, domestic passenger traffic, total international flights and international departures.
The airport additionally set a record for aircraft served through Passenger Boarding Bridges (PBBs). A total of 218 aircraft used the boarding bridges on Sunday, surpassing the previous daily record of 212.
Hanita Ahmad, executive director of Sabiha Gökçen, said passenger traffic had surpassed 180,000 for the first time, reflecting both strong demand for the airport and its operational capacity.
“As Sabiha Gökçen, we will continue focusing on continuously improving the passenger experience and sustainable growth in line with our vision of becoming a regional transfer hub,” Ahmad said.
Türkiye’s central government budget swung to a deficit in July, but Treasury and Finance Minister Mehmet Şimşek said the government remains on track with its fiscal targets despite the impact of geopolitical developments.
The budget recorded a TL 378.1 billion ($7.89 billion) deficit last month, according to data from the Treasury and Finance Ministry. That follows a TL 114.2 billion surplus in June.
Budget expenditures totaled TL 1.79 trillion, while revenues reached TL 1.41 trillion in July. The primary balance posted a deficit of TL 51.3 billion, while interest payments amounted to TL 326.8 billion.
Despite the monthly deficit, Şimşek said the government was maintaining fiscal discipline and progressing in line with its budget goals.
For the January-July period, the budget registered a deficit of TL 1.32 trillion. Expenditures reached TL 10.52 trillion, compared with revenues of TL 9.20 trillion.
The government recorded a TL 470.1 billion primary surplus during the first seven months of the year, as primary expenditures totaled TL 8.73 trillion.
The primary surplus, an important indicator of the government’s fiscal position excluding interest payments, increased by TL 228 billion from the same period a year earlier, Şimşek said.
Tax revenues also continued to rise. Tax collections increased 30% year-over-year in July to TL nearly 1.24 trillion, while other non-tax general budget revenues rose 18.9% to TL 145.6 billion.
Fiscal policy to support disinflation
Şimşek said fiscal policy was being implemented with the broader disinflation program in mind.
He noted that the government had forgone a significant amount of tax revenue through the sliding-scale tax mechanism on fuel prices to help support the disinflation process. He also said the ongoing rebalancing of domestic demand had affected revenue performance.
“Despite the significant tax revenue forgone under the sliding-scale mechanism to support disinflation and the impact of the rebalancing in domestic demand on revenue performance, we are progressing in line with our budget targets,” Şimşek said.
The minister added that the government had kept its domestic debt rollover ratio at around 87%, taking financing conditions into account.
He said stronger revenue collection and tighter spending discipline had created fiscal space that would be directed toward priority areas while continuing to support the disinflation process.
“With increased effectiveness in our revenue policies and stronger spending discipline, we will continue directing the fiscal space we have created toward priority areas and supporting the disinflation process,” Şimşek said.
Türkiye’s automotive production fell 8% year-over-year in the first seven months of 2026, while exports by volume declined 14%, as weaker passenger car output and fewer working days weighed on the sector, data showed Monday.
But industry officials said the decline partly reflects preparations by automakers to introduce new models and expand capacity, with the impact of those investments expected to become more visible in the final quarter and particularly in 2027.
Automotive Industry Association (OSD) Chair Cengiz Eroldu said some of their members were preparing their production lines for new models and capacity investments.
“When a new product is introduced to a production line, the existing production pace has to be reduced for a certain period. We consider the production loss to be a normal consequence of the transition to new investments,” Eroldu said.
Hyundai, Opel and Peugeot just recently announced new investments and launches of production of new models in Türkiye.
Hyundai on Friday started mass production of its new all-electric IONIQ 3 model at a factory in Türkiye’s northwestern Kocaeli province.
Earlier this month, Opel said it was moving production of its light commercial vehicle model Combo to Türkiye from the third quarter of this year.
In late July, Peugeot announced it would begin producing its Rifter light commercial vehicle in Türkiye beginning in the third quarter.
Production falls as passenger car output weakens
Eroldu, meanwhile, said the sector also lost around five to six working days in the first seven months compared with the same period last year because of public holidays and administrative leave.
Total automotive production reached 767,216 vehicles in January-July, down 8% from a year earlier, the OSD data showed. Passenger car production declined 19% to 424,667 units.
Commercial vehicle production, however, remained more resilient, rising 9%. Within the segment, production increased 16% for midibuses, 15% for light trucks, 8% for buses and 1% for trucks, while minibus production fell 9%.
The industry’s overall capacity utilization rate stood at 62%, with utilization at 63% for light vehicles, 69% for buses and midibuses, 57% for trucks and just 28% for tractors.
Eroldu said the differing performance across vehicle categories was significant.
“Production declines were concentrated mainly on the passenger car side, while we are seeing a more positive trend in light commercial and heavy commercial vehicles,” he said, adding that the sharp decline in tractor production and the more than 50% contraction in the domestic tractor market warranted attention.
New investments expected to lift local production
Despite the production decline, Eroldu said new investments were already beginning to support the share of locally produced vehicles in the domestic market.
The share of domestically produced vehicles in the passenger car market rose to 35% from 29% a year earlier. Locally produced passenger car sales increased 4%, while imported sales fell 19%.
In the light commercial vehicle market, locally produced vehicle sales rose 13%, lifting their share to 23%, while imported sales fell 9%.
Eroldu said the increase in the domestic share was an early indication of the impact of new investments and that the contribution should become more pronounced as production of new models ramps up.
“The positive impact of new models entering production and export programs will become apparent in the final quarter of the year and, more significantly, in 2027,” he said.
Export volumes decline, but revenue remains resilient
Automotive exports fell 14% by volume to 542,401 vehicles during the first seven months, according to the OSD data. About 71% of total production was exported.
Passenger car exports dropped 29% to 255,679 units, while commercial vehicle exports increased 8%. Tractor exports rose 20% to 7,792 units.
Despite the decline in unit exports, export revenue continued to increase. According to Türkiye Exporters Assembly (TIM) data, total automotive exports rose by around 2%-2.6% in dollar terms to approximately $24 billion.
Uludağ Automotive Industry Exporters’ Association data showed passenger car export revenue fell 9% to $6.3 billion, while exports by main manufacturers increased 0.1% and those by suppliers rose 4.5%.
Automotive remained Türkiye’s leading export sector, accounting for 17% of total exports.
Domestic market contracts, but local share increases
The total automotive market shrank 11% year-over-year to 661,249 vehicles in January-July. Passenger-car sales fell 12% to 502,712, while the commercial vehicle market contracted 5%.
Heavy commercial vehicle sales declined 8%, but bus sales rose 23% and midibus sales increased 14%.
Eroldu noted that despite the market contraction, the sector remained significantly above its long-term averages. Compared with the previous 10-year average, the total market was 31% higher, the passenger car market 32% higher, the light commercial market 30% higher and the heavy commercial market 22% higher.
Europe remains key to industry’s outlook
Eroldu said the performance of the domestic market, demand and competitive conditions in Europe, and the implementation of new models would be critical for the remainder of the year.
He expects full-year production and exports to remain somewhat below 2025 levels but relatively close to last year’s performance.
Looking ahead to 2027, the sector will focus on domestic demand, global vehicle demand, China’s competitive pressure, cost pressures, excess capacity and the European Union’s proposed Industrial Acceleration Act (IAA).
Europe accounts for around 70% of Türkiye’s automotive exports, making the outcome of the IAA negotiations particularly important for Turkish manufacturers and suppliers.
“We expect the negotiation process to extend into 2027,” Eroldu said, stressing that Türkiye’s automotive industry is deeply integrated with Europe’s manufacturing, investment and supply chains.
He said the industry wants Türkiye to be treated within the EU framework as a customs union partner and an integral part of the European automotive value chain, covering both vehicle manufacturers and suppliers.
Eroldu also said that reducing cost pressures caused by the gap between exchange rates and inflation, improving exporters’ access to finance and maintaining predictability in the investment environment would be crucial to the industry’s competitiveness in 2027.
Japan’s economy lost momentum in the second quarter and fell short of market forecasts, as subdued household and business spending highlighted the fragility of the recovery as the war in the Middle East darkens the outlook.
However, long-term bond yields hit a three-decade high as investors brushed aside the soft reading as reflecting one-off factors, and focused more on mounting inflationary risks that could prod the Bank of Japan (BOJ) to raise interest rates next month.
Gross domestic product (GDP) rose 1.1% in annualized terms, government data showed on Monday, missing a median market estimate of 2% and below an upwardly revised 1.9% expansion in the previous quarter.
While the data revealed some temporary soft patches in demand, analysts say robust underlying momentum and persistent price pressures are likely to keep the case for imminent interest rate hikes intact.
“Today’s GDP data was a bit weak but the economy is likely to continue recovering moderately,” said Naoki Hattori, chief Japan economist at Mizuho Research Institute. “Given risks of underlying inflation overshooting its target, the BOJ is likely to proceed with a rate hike next month.”
The BOJ is expected to raise rates as soon as September and is said to be considering hiking more aggressively thereafter to avoid being behind the curve on inflation.
The benchmark 10-year Japanese government bond (JGB) yield rose for a sixth straight session on Monday to hit a 30-year high of 2.925%, as investors continued to price in BOJ rate hikes sooner and faster than earlier expected.
Private consumption was the biggest disappointment in the GDP data, falling 0.02% versus market expectations for a 0.5% increase, the first drop in eight quarters.
Analysts said the weakness was due in part to lower school fees households paid thanks to subsidies, which pushed down headline private consumption but lifted government spending.
Capital spending, a key driver of private demand, fell 1.2% in the second quarter, confounding market forecasts for a 0.4% increase. However, capital expenditure, as well as overall preliminary GDP, tend to be revised higher with updated figures.
Exports remained resilient thanks to solid U.S. demand for Japanese hybrid vehicles and sustained global investment in artificial intelligence that supported shipments of semiconductor-related equipment and components.
Net external demand, or exports minus imports, added 0.5 percentage point to growth, largely because imports fell sharply after temporary disruptions to crude oil shipments through the Strait of Hormuz.
“I don’t think the BOJ would be too worried about today’s GDP data as the economy is showing remarkable resilience to headwinds from the Iran war,” said Yoshiki Shinke, senior executive economist at Daiichi Life Research Institute.
The government maintained its sanguine view on the economy.
“The economy remains on a moderate recovery path, with export-driven growth offsetting weakness in domestic demand,” Economy Minister Minoru Kiuchi said in a statement.
Outlook murky
Looking ahead, analysts cautioned that rising import costs and mounting upstream price pressures could eventually feed through to consumers, posing a risk to spending later this year.
Aside from rising fuel costs from the Middle East conflict, a weak yen has lifted import prices and broader cost-of-living for households, posing a headache for policymakers.
Such price pressures have led to a flurry of hawkish comments from BOJ policymakers that bolstered the case for an early rate hike.
The government has sought to cushion the blow to households from rising living costs with subsidies, though rising bond yields may prevent it from ramping up fiscal spending any further, some analysts say.
That spells trouble for consumption, which is mostly holding up so far as a tight job market prods firms to offer higher pay.
“Government subsidies have helped contain consumer inflation so far, but a weaker yen and higher crude oil import costs raise the likelihood of broader price hikes from the autumn onward,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
A survey this month by the Japan Center for Economic Research showed 37 economists forecast annualized GDP growth to slow to an average 0.05% in the July-September quarter.
“The boost to consumption from policy measures is already fading, and inflation will increase in H2 as firms will pass on increased costs, deteriorating consumers’ purchasing power,” Oxford Economics wrote in a research note.
“Although AI-related goods exports will continue to stay robust in the near term, sluggish non-AI related global economic activities will limit overall export gains.”
German companies’ investments in the U.S. have dropped to a three-year low in the first half of 2026, as Trump administration policies continue to raise uncertainty and pose risk for trade between the key trans-Atlantic partners, data shows.
First-half direct investments plunged by nearly two-thirds year-over-year to 4.3 billion euros ($5 billion), the lowest level since 2023, according to calculations by the German Economic Institute (IW), seen by Reuters.
Compared with the same period in 2024, that represents a drop of nearly 80%, said the report, which is based on data from Germany’s central bank.
“This continues the downward trend that has been evident since the start of Donald Trump’s second term in January 2025,” IW researcher Samina Sultan told Reuters.
Since returning to office, Trump has threatened most of the United States’ international trading partners with import tariffs in an attempt to secure concessions favourable to Washington.
In a bid to avoid heavy duties on its exports to the U.S., for example, the European Union agreed a deal last year that included a $600 billion investment pledge.
In the five years before the COVID-19 pandemic, first-half investments by German companies in the U.S. averaged 15.8 billion euros, the data showed, almost four times the 2026 level.
That said, the 2020 to 2023 period was shaped by the “exceptional circumstance” of the pandemic, Sultan said, with some years marked by net investment outflows.
The researchers also examined the composition of investment flows over 2025 and found that both direct-investment loans and reinvested earnings were exceptionally high, while equity capital in the narrower sense – the balance of new investments and liquidations – remained below average.
“Companies that are already active in the United States are therefore continuing to reinvest the profits they earn there in the country,” Sultan said.
“This suggests that the U.S. remains an attractive market overall.”
However, companies were hesitant to commit new capital, she said.
For more than a century, cafes in the Italian northern city of Padua have grown accustomed in welcoming customers for an early evening drink, or aperitivo, encouraging them to sit outside and socialize just at the time before dinner.
As Europe bakes under its fifth heat wave of the year, the traditional 6 p.m. to 7 p.m. slot has all but disappeared as people seek air-conditioning indoors, cutting sales for many hospitality businesses.
Adding to the pressure, extreme heat often falls outside traditional business interruption insurance, exposing a growing protection gap for companies across Europe.
Moody’s has published estimates that last summer’s European heat waves cost 43 billion euros ($50 billion) in lost economic output while generating only about 500 million euros of insured payouts.
In Padua, aperitivo often now starts later, “which means that the outdoor seating areas, the terraces, the spaces outside … are left unused and empty,” said Federica Luni, president of hospitality association APPE Padova.
According to a survey of about 600 hospitality businesses in the city and its province, more than 80% reported turnover declines of around 20% during the recent heatwave.
“A 20% decline wipes out your margin,” Luni said.
Toll on economy
Heat waves are increasingly taking a toll on Europe’s economy, reducing productivity, curbing consumer spending and raising operating costs.
For insurers, such losses can be difficult to cover because they often stem from indirect operational disruption rather than property damage.
“Heat in itself is not a traditionally insured risk,” said Swenja Surminski, managing director for climate and sustainability at Marsh.
“Extreme heat rarely causes catastrophic physical damage the way a flood or a storm does, but the financial operational disruption that it triggers can be just as severe.”
A 2023 survey of 9,000 small and medium-sized firms for Europe’s insurance regulator found 28% held business interruption cover as part of their property insurance, while 17% had non-damage business interruption protection covering events such as strike action.
The protection gap is widening as the economic costs of extreme heat mount. Trains are delayed, agricultural yields fall and factory cooling costs rise, while workers often struggle to maintain productivity during prolonged spells of extreme temperatures.
Companies that flagged a hit from hot weather or warned about its potential future impact when reporting second-quarter earnings included Swedish shop-fitting provider ITAB Group, Italian cement producer Buzzi and French payments firm Worldline.
Compound risk
Heat often acts as a compound risk, interacting with drought, wildfire and water shortages rather than triggering a single identifiable loss event. That makes it harder to model and insure than some other natural catastrophes.
The challenge is particularly acute in Europe, the fastest-warming continent. Reuters Climate Monitor showed the average temperature across Western Europe was nearly 10 degrees Celsius (18 degrees Fahrenheit) above the 1961 to 1990 average on Aug. 11.
Data compiled by environmental disclosure platform CDP showed 35% of companies it tracks identified heatwaves as a risk driver, led by businesses in manufacturing, services, infrastructure and food-related sectors.
While insurance may cover some physical losses linked to events such as power outages, businesses often say compensation does little to offset lost sales and reduced customer activity.
“The real loss is the revenue you don’t make and the business activity that never takes place because of the outage,” Luni said.
To bridge the gap, insurers are increasingly exploring parametric products that pay out automatically when temperatures exceed predefined thresholds. Unlike traditional indemnity-based insurance, such policies do not require a lengthy loss-adjustment process.
The European market for parametric insurance is expected to reach $7.93 billion by 2031, according to a report by KBV Research, with compound annual growth of 9.5% between 2025 and 2032.
Such policies are already being used in agriculture, where heat can reduce crop yields or livestock productivity, and industry experts see scope for expansion into sectors including transport and workforce protection.
“Parametric insurance can really play a role,” said Aidan Kerr, head of U.K. and Ireland public sector solutions at Swiss Re.
Even so, many companies will need to focus primarily on adapting their operations to withstand more frequent periods of extreme heat through measures such as investing in cooling technologies, redesigning workplaces and stress-testing supply chains, Marsh’s Surminski said.
“Take action to avoid the losses rather than address them once they’ve occurred.”
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