2023-04-24 10:47:32
Insurers should offer offers to households and businesses, including, for example, discounts if policyholders take action to reduce their exposure to climate risk.
By Le Figaro with AFP
Posted update
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The European Central Bank (ECB) and the European Insurers Authority (EIOPA) on Monday called for closing the loss coverage gap resulting from climate-related disasters in the EU, which is likely to increase further in the future. Only a quarter of claims from climate-related disasters in the EU – storms, floods, forest fires – are currently insured and this deficit is expected to widen as the impact of climate change increases, explain the two institutions in a joint working document.
In the EU, many residents underestimate the costs of climate-related damage or prefer to rely on support from governments, according to the ECB and EIOPA. “We must increase the use of weather catastrophe insurance to limit the growing impact of natural disasters on the economy and the financial system“Said ECB Vice-President Luis de Guindos, quoted in a statement. “We must respond to the growing gap in insurance protection by proposing and finding appropriate solutions“, insisted the president of the European authority of insurers, Petra Hielkema.
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Public-private partnerships approaching?
Placed on the front line, insurers should offer attractive offers to households and businesses, including, for example, discounts if policyholders take measures to reduce their exposure to climate risk, believe the two institutions in their working document. It would then be a question of extending the emissions of “cat bonds(catastrophe bonds), which allow insurers to transfer the risk associated with certain natural events to the market. Along the same lines, governments might put in placepublic-private partnerships“, like those existing in France, Spain and the United Kingdom.
In these partnerships, insurers and reinsurers take on some of the risk alongside the government, while policyholders can be encouraged to adapt to risk, thereby reducing moral hazard. Finally, insurance schemes at national level might be complemented by an EU-wide public scheme. It would ensure that sufficient funds reach countries for reconstruction following a major climate-related disaster. The floods in the summer of 2021 in Europe caused damages totaling 46 billion euros in costs, of which only 11 billion euros were insured. Germany has committed in response up to 30 billion euros to finance reconstruction efforts.
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