EU Proposes Public-Private Reinsurance Scheme for Climate Catastrophes

The European Central Bank and EU insurance regulator propose a scheme to boost insurance coverage for climate catastrophes. With only a quarter of such losses insured, climate disasters pose risks to the economy. The scheme would involve risk-based premiums and aims to protect low-income households.

The European Central Bank and the EU's insurance regulator stressed the need for enhanced insurance coverage across Europe's businesses and homes to fortify against climate catastrophes. Their latest proposal seeks to increase insurance uptake amid escalating natural disasters.

Currently, only about 25% of natural catastrophe losses are insured, a gap predicted to widen with climate change's intensification. This poses a significant risk to the broader economy and financial stability. The EU is urged to implement a public-private reinsurance scheme to bolster climate-linked disaster coverage and consolidate private risks, according to the ECB and EIOPA.

Frequent climate events are likely to push up premiums, potentially making insurance inaccessible to low-income families. To address this, a new EU fund for post-disaster infrastructure rebuilding has been suggested, with conditions attached to eligibility. This is part of a broader effort to shrink the 'insurance protection gap', as highlighted by EIOPA Chairperson Petra Hielkema.

(With inputs from agencies.)