Europe’s insurance regulator has launched a new dashboard as it seeks to ensure the industry can get a better grip ion the impact of climate change.
The European Insurance and Occupational Pensions Authority (EIOPA) has published its first pilot dashboard, which aims to highlight the insurance protection gap for natural catastrophes.
It said the aim of the dashboard is to represent the drivers of a climate-related insurance protection gap in order to identify measures that will help in decreasing society’s losses in the event of natural catastrophes.
“In light of climate change, EIOPA is concerned that affordability and insurability of natural catastrophes (Nat Cat) insurance coverage is likely to become an increasing concern,” the regulator said. “Currently, only 35% of the total losses caused by extreme weather and climate-related events across Europe are insured. The uninsured part is therefore equal to 65% of the losses for climate-related events, which shows that there is a protection gap.
“Climate change will continue for many decades to come. Improved climate projections provide further evidence that future climate change will increase climate-related extremes (e.g. heat waves, heavy precipitation, droughts, flood, top wind speeds and storm surges) in many European regions.”
“In order to address the protection gap, increasing the insurance penetration is not sufficient as due to the increasing frequency/intensity of some events, some risks might become uninsurable,” EIOPA added. “Pro-active measures on buildings’ vulnerability, localisation of exposure and optimised insurance coverages will be important elements of a resilient society.”
Losses to properties and businesses are expected to grow due to climate change,” said the regulators and as such the price of insurance will also increase. Over the medium-to-long term, the fear is that it will lead to insurance being unavailable or unaffordable for citizens and businesses, leading to a further widening of the insurance protection gap.
EIOPA said the dashboard brings together data on economic and insured losses, vulnerabilities and exposure as well as insurance coverage across the European Union Member States.
“This information should allow for evidence-based decision-making on measures to improve society’s resilience against natural catastrophes,” added EIOPA. “At the same time, the pilot dashboard should also help increasing the awareness of the protection gap, promote science-based approach to protection gap management and decision-making. This approach will help in identifying risky regions at risk, protection gap risk drivers as well as defining proactive prevention measures.”
The pilot dashboard is part of EIOPA’s broader sustainability agenda to integrate environmental, social and governance (ESG) risk assessment in the regulatory and supervisory framework. EIOPA said it is committed to supporting the European insurance and occupational pension sectors in their transition to climate neutrality and to deliver on the “Green Deal” initiated by the European Commission.