Europe is increasingly vulnerable to escalating climate risks, with extreme weather events tripling over the past four decades.

However, only 25% of climate-related losses in Europe are insured, leaving a significant protection gap.

Addressing this gap requires public-private partnerships and innovative insurance models to bolster resilience.

The continent is experiencing rapid climate change, warming at twice the global average since 1980. As a result, flash floods, heavy rains, heatwaves, and wildfires are becoming more frequent and severe, posing substantial risks to Europe's economy, environment, and public health.

Economic Consequences

The financial toll of these climate events is considerable. In 2023 alone, Europe incurred economic losses of €270 billion due to extreme weather. Yet, only about a quarter of these losses are covered by insurance, exposing a significant protection gap that threatens economic stability and puts additional strain on government resources.

The Role of Insurance

Insurance plays a crucial role in mitigating the economic impacts of climate disasters by offering financial protection and promoting risk reduction measures. According to recent analysis by the European Insurance and Occupational Pensions Authority (EIOPA), insurance is essential for cushioning the negative effects of climate-related events. However, the decreasing availability and increasing cost of insurance could further widen the protection gap, amplifying economic and systemic risks.

Public-Private Partnerships

To tackle this issue, EIOPA advocates for exploring new public-private partnerships at both the EU and national levels. These partnerships could help promote risk prevention and adaptation strategies, making insurance more affordable and accessible. EIOPA emphasizes that “greater cooperation between the insurance industry, regulators, supervisors, and governments is crucial for enhancing resilience and closing the protection gap.”

Improving Risk Assessment

EIOPA is at the forefront of catastrophe modeling and data sharing, offering valuable tools for better assessing climate risks. The Climate Resilience Dialogue highlights the importance of continuing efforts to measure insurance protection gaps and suggests creating an EU-wide public data hub for natural catastrophes to enhance data accessibility for effective risk assessment.

Enhancing Consumer Awareness

Educating consumers about climate risks and promoting the adoption of insurance are also vital. EIOPA is developing strategies to increase insurance penetration, such as offering premium discounts for risk mitigation efforts. "Impact underwriting," where insurers incentivize clients to reduce their risk exposure, is a key approach that benefits both consumers and insurers.

As Europe faces intensifying climate risks, innovative insurance solutions and strong public-private partnerships are essential. By raising risk awareness, improving data sharing, and fostering collaboration, Europe can strengthen its resilience and better safeguard its citizens against future climate-related disasters.