In a joint working paper, the European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA) urged insurers to fill the coverage gap for natural disasters.
According to the two agencies, just 25% of losses brought on by natural disasters like floods, storms, and forest fires are covered by insurance in Europe. In certain EU nations, including Lithuania, Hungary, Bulgaria, Italy, Greece, Malta, and Cyprus, this rate is less than 5%. Many individuals miscalculate the expense of climate-related harm and even favor relying on government assistance.
Future natural disasters and weather-related losses are predicted to become more severe and frequent by industry experts. The insurance coverage gap can significantly affect the financial stability and economy of European nations.
The ECB and EIOPA have suggested a few strategies that insurance companies might use to increase the penetration rate of this kind of insurance in their document:
- Presenting households and businesses with enticing offers like reductions on insurance premiums,
- Increasing the availability of cat bonds, which enables insurers to transfer risk to the market;
- Creating public-private collaborations,
- Establishing a public program for the entire EU to supplement the state insurance programs.
