The European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA) have called for a public-private reinsurance scheme across the European Union to address the growing impact of climate-linked disasters. With only 25% of natural catastrophe losses currently insured, the proposal aims to reduce financial and economic risks as climate events become more frequent and severe.
The recommended reinsurance scheme would be funded by risk-based premiums from insurers or national insurance programs, pooling private risks to enhance coverage for climate-related disasters. The ECB and EIOPA also propose a new EU fund to help rebuild public infrastructure post-disaster, with funding contingent on countries implementing measures to mitigate climate risks.
“We need to increase the uptake of climate catastrophe insurance to limit the growing impact of natural disasters on the economy and the financial system,” said ECB Vice-President Luis de Guindos.
Europe, the fastest-warming continent, has experienced devastating climate-related disasters in 2024. October floods in Spain resulted in over 220 fatalities, drought ravaged Italy’s agriculture industry, and Greece faced widespread wildfires.
The joint paper warned that increasing premiums, driven by more frequent climate events, could make insurance unaffordable for low-income households. It also highlighted a decline in insurance coverage among these households, increasing pressure on governments to provide support during natural catastrophes.
EIOPA Chairperson Petra Hielkema emphasised the urgency of closing the “insurance protection gap” to shield businesses and individuals from escalating climate-related losses.
