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The climate insurance protection gap

Extreme weather and climate events can have significant macroeconomic implications. They can also affect financial stability and weaken the financial position of governments that have to step in to provide relief or cover losses in the aftermath of a catastrophe. While the effects of such events can be mitigated by catastrophe insurance, only about a quarter of climate-related catastrophe losses are currently insured in the EU. In some countries, the figure is less than 5% (see chart).


The share of insured economic losses related to natural catastrophes in Europe is low and could decline in the medium to long term

Average share of insured economic losses caused by weather-related events in Europe

(1980-2021, percentages)

Sources: EIOPA dashboard on insurance protection gap for natural catastrophes, European Environment Agency (EEA) CATDAT.

The European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA) have worked together on how to enhance the insurance of European households and companies against climate-related catastrophes such as floods or wildfires. Our joint discussion paper sets out possible actions to increase the uptake and efficiency of catastrophe insurance while creating incentives to adapt to and reduce climate risks.

The paper is aimed at triggering a debate on how to tackle the climate insurance protection gap. 

The policy options set out in the discussion paper should be complementary to ambitious mitigation policies to tackle climate change and reduce associated catastrophe risks. The proposed actions have been designed to fulfil the following main objectives:

  • help provide prompt insurance claim pay-outs after a natural disaster
  • incentivise risk mitigation and adaptation measures
  • be complementary to existing insurance coverage mechanisms
  • require the sharing of costs and responsibilities across the relevant stakeholders to ensure “skin in the game” and reduce moral hazard
  • lower the share of economic losses from major natural disasters borne by the public sector over the long term

This discussion paper is part of the ECB’s climate agenda and its work to improve the overall understanding of climate-related risk.

A ladder approach to reduce the climate insurance protection gap


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Private insurance

Private insurance should be the first line of defence to cover losses from climate-related natural disasters. Policies should be carefully designed to ensure that they encourage adaptation and reduce vulnerability to climate-related catastrophes over time.

Read more about private insurance

Reinsurance and alternative risk transfer

Reinsurance and financial market instruments such as catastrophe bonds may help to pass on part of the risk from insurers and reduce the overall cost for policyholders and insurers.

Read more about Reinsurance and risk transfer

National-level measures

Governments could set up public-private partnerships and backstops to partly cover the costs that insurers may incur in the event of major disasters. They should also prepare for climate-related catastrophes by enhancing their disaster risk management strategies.

Read more about national measures

EU-level measures

For less frequent, large-scale disasters, an EU-wide public scheme for natural disaster insurance could complement national schemes.

Read more about EU-level measures

Related content

Full paper

This discussion paper presents possible actions to tackle the insurance protection gap and mitigate catastrophe risks from climate change in the EU.

Read the paper
The ECB Blog

Read more about the ECB's and EIOPA's ideas to reduce the climate insurance protection gap and increase resilience to climate change.

Read The ECB Blog post
For the media

Read a summary of the key takeaways from our discussion paper.

Read the press release
Presentation slides

Find out more about the relevance of the climate insurance protection gap and the related policy options.

View the slides

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