From the point of view of the European Central Bank (ECB) and the EU insurance supervisory authority EIOPA, companies and households in the EU are only insufficiently protected against damage from climate change.
“We need to increase the uptake of climate catastrophe insurance to limit the increasing impact of natural disasters on the economy and the financial system,” ECB Vice President Luis de Guindos said today.
In a joint discussion paper, the ECB and EIOPA warned that only a quarter of climate-related catastrophe losses are currently insured. This gap even widened as the consequences of the climate crisis became increasingly felt. This poses risks for the economy and financial stability.
Insurers have played an important role in protecting businesses and people from climate-related disaster damage by quickly providing necessary funds for reconstruction, according to EIOPA chief Petra Hielkema. Catastrophe bond issuance and public-private partnerships could be approaches to address the problem.
