Estimating the tick-borne encephalitis (TBE) infection risk under substantial uncertainties of the vector abundance, environmental condition and human-tick interaction is important for evidence-informed public health intervention strategies. Estimating this risk is computationally challenging since the data we observe, i.e., the human incidence of TBE, is only the final outcome of the tick-host transmission and tick-human contact processes. The challenge also increases since the complex TBE virus (TBEV) transmission cycle involves the non-systemic route of transmission between co-feeding ticks. Here, we describe the hidden Markov transition process, using a novel TBEV transmission-human case reporting cascade model that couples the susceptible-infected compartmental model describing the TBEV transmission dynamics among ticks, animal hosts and humans, with the stochastic observation process of human TBE reporting given infection. By fitting human incidence data in Hungary to the transmission model, we estimate key parameters relevant to the tick-host interaction and tick-human transmission. We then use the parametrized cascade model to assess the transmission potential of TBEV in the enzootic cycle with respect to the climate change, and to evaluate the contribution of non-systemic transmission. We show that the TBEV transmission potential in the enzootic cycle has been increasing along with the increased temperature though the TBE human incidence has dropped since 1990s, emphasizing the importance of persistent public health interventions. By demonstrating that non-systemic transmission pathway is a significant factor in the transmission of TBEV in Hungary, we conclude that the risk of TBE infection will be highly underestimated if the non-systemic transmission route is neglected in the risk assessment.