A new paper from the European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA) highlights the potential for increased use of catastrophe bonds to support the overall supply of catastrophe insurance across the European Union (EU), as climate change threatens to widen the protection gap.
According to the joint discussion paper, currently, just 25% of EU climate-related catastrophe losses are insured, meaning that when disaster strikes, 75% of the financial impact is not covered by re/insurers. In fact, the report finds that in some countries within the EU, the insured figure is below 5%, which is dangerously low and poses risks to economy and financial stability.
“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. “However, to reduce losses in the first place, we must ensure that a smooth and speedy green transition is complemented by effective measures to adapt to climate change.”
FULL ORIGINAL PUBLICATION HERE