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The extreme weather events of the past few years from flash floods in Germany, torrential rain in Slovenia as well as crippling heatwaves and wildfires across the Mediterranean have shown that no region is safe from the harmful effects of a changing climate. The recent natural catastrophes are not isolated incidents but a feature of a new climate reality.
Since 1980, Europe has been warming twice as fast as the global average and weather patterns on the continent are becoming more unpredictable – and more violent. This irregular climate affects not only our built environment and farmlands but also our economy and collective health.
Over the past four decades, the frequency of extreme weather events worldwide has tripled, resulting in economic losses of €270 billion in 2023 alone. Without decisive action, the trajectory points to yet more disruption and yet higher losses in the future.
Finding the right answers to how we can mitigate climate change and adapt to its effects, requires expertise from a wide range of policy areas. That is why EIOPA welcomes the new report by the Climate Resilience Dialogue, convened by the European Commission. This interdisciplinary report, grounded in the insights from stakeholders with a broad knowledge base, aligns closely with EIOPA’s own sustainable finance priorities.
Harnessing the power of insurance
Insurance plays an important role in cushioning the negative macroeconomic, financial stability and fiscal implications of catastrophes. Insurers’ investment power, underwriting capacity and risk assessment skills can provide fresh financing, much-needed protection and actionable guidance for dealing with climate risks. When catastrophes hit, insurance limits losses and helps economies bounce back quicker and more completely, thereby reducing fiscal pressure on countries with high physical risks.
Despite this, EIOPA’s analysis shows that only about a quarter of weather- and climate-related economic losses have been insured in Europe. This large protection gap has a detrimental impact to Europe’s economy and its citizens. As losses are set to increase, the shrinking availability and rising cost of insurance will only widen the insurance protection gap, amplifying the economic costs, systemic risks and fiscal pressure on governments.
Reducing the cost of insurance via burden sharing
.... as they can promote risk prevention and adaptation, reduce the cost of the risk transfer ex ante and incentivise the supply of and demand for insurance.
Building on its earlier work with the ECB in identifying policy options for addressing natural catastrophe insurance gaps, EIOPA is working on concrete recommendations regarding the key features of public-private initiatives that can improve the affordability of insurance and reduce the burden on national governments. Our analysis of existing private-public schemes can inform the development of a potential EU-wide solution and provide momentum for it.
To achieve the report's goals of improving risk identification, raising risk awareness, and encouraging adaptation and prevention, EIOPA sees value in greater cooperation between the insurance industry, regulators, supervisors and governments....
more at EIOPA