The European Central Financial institution (ECB) and the European Insurance coverage and Occupational Pensions Authority (EIOPA) have proposed a joint paper to scale back the insurance coverage safety hole for pure catastrophes inside the EU.
This initiative builds upon a 2023 dialogue paper that advocated a collaborative strategy between the non-public and public sectors to handle pure disaster insurance coverage.
The proposal is a response to the rising frequency and severity of pure disasters, and the related financial losses.
The intention is to give protection to people, companies and governments, whereas additionally addressing the associated macroeconomic and monetary stability dangers inside the EU.
The paper highlights that as pure catastrophes turn out to be extra frequent and extreme, insurance coverage might turn out to be much less inexpensive, probably widening the insurance coverage safety hole.
It additionally raises issues in regards to the affordability of insurance coverage, significantly for low-income households, as premiums are anticipated to rise with the rising incidence of local weather disasters.
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The decline in insurance coverage protection amongst households places extra stress on governments to offer assist within the aftermath of pure catastrophes.
The proposal embody two pillars – an EU public-private reinsurance scheme to boost protection for pure disaster dangers and an EU fund to strengthen public catastrophe threat administration in member states.
EIOPA chairperson Petra Hielkema stated: “Latest occasions in Europe have proven the challenges the EU and its Member States are going through in coping with pure catastrophes. This requires coordinated motion. The proposals introduced are supposed to spark a dialogue on doable methods to scale back the insurance coverage safety hole by an EU-level resolution, whereas preserving the integrity of nationwide insurance coverage schemes.”
ECB vice-president Luis de Guindos said: “We have to get ready for the rising local weather dangers. The proposed resolution is one doable strategy to mitigate the macroeconomic and monetary stability dangers from pure catastrophes, whereas additionally lowering ethical hazard.”
