Issuing “catastrophe bonds” and setting up public-private partnerships could help plug the “insurance gap” to better cover damage from climate change, a discussion paper from the European Central Bank and European Union insurance regulators said on Monday.
Only a quarter of EU climate-related catastrophe losses are insured, creating risks to the economy and financial stability from uninsured households and businesses not being able to recover quickly from extreme events like fire or flood, the paper from the ECB and EU insurance watchdog EIOPA said.Without action, the insurance gap could widen as more frequent and intense events lead to higher premiums, and impact credit supply from banks in high risk areas.Direct aggregate catastrophe losses in the EU totaled 487 billion euros ($535 billion) between 1980 and 2020, and insurer Swiss Re has estimated there were $120 billion of catastrophe losses globally last year.Six consecutive years of above-average losses have driven property catastrophe reinsurance prices up, with European rates increasing by 30% at the January 2023 renewals, international broker Howden has said.
via Reuters
