EIOPA proposes further steps to close the European natural catastrophes protection gap
In his inspired keynote speech at the opening of the 9th Annual EIOPA conference titled “Insurance and Pensions: leading the future”, Gabriel Bernardino, EIOPA’s chairman, called upon the sector to do right for the next generation and to show leadership. “No one should suffer because we are too complacent to act.” All have a powerful role in mitigating the impact of climate change and ensuring a gradual transition to a more sustainable and resilient economy. For insurers and pension funds, this is especially true in the area of asset management. In underwriting, insurers should consider the impact of their underwriting practices. Risk mitigation and loss prevention can make a significant difference, while maintaining the fundamental principles of sound risk-pricing. However, this is only relevant if there is protection being bought. There is an important European protection gap due to climate change in the area of natural catastrophes (NATCAT) with a considerable disparity in terms of insurance penetration, catastrophe exposure and disaster preparedness. The very large majority of EU Member States don’t even have a NATCAT scheme, and governments are budget tight. Will governments continue to play their role as insurer of last resort?
Any protection gap in the area of NATCAT impacts households, businesses, the financial system and ultimately governments. Better understanding the underlying causes of that protection gap across Europe is a first step. Chairman Bernardino proposed to build a European risk dashboard on natural catastrophes. Such dashboard could better inform political decisions on the national and European measures to put in place. But he also proposed to make the resilience gap part of the European Semester discussions between the European Commission and the Member States. Only a European approach will enable us to build sufficient resilience to this threat. Because climate change and weather do not stop at the borders.
This proposal, if put in place, may break the deadlock around moving towards a European solution for NATCAT. In 2013, the European Commission published a Green Paper on the insurance of natural and man-made disasters which revealed that the EU is working ‘to facilitate and support increased coverage of appropriate disaster risk insurance and financial risk transfer markets, as well as regional insurance pooling (…)’. But not much seems to have happened since. Respondents were at best lukewarm, and had very limited appetite for compulsory insurance. The European Parliament adopted a resolution in 2014 which was not favourable and supportive for any European action in the field. But is such position anno 2019 still responsible? Referring to complacency, Bernardino as chair of EIOPA clearly thinks that this is no longer an option and that minds and ultimately money has to move.