Title: Sharing the risk: a European approach to natural catastrophe risk management
Authors: Joint publication by the ESM and EIOPA (European Insurance and Occupational Pensions Authority)
Abstract: The increasing frequency and severity of natural catastrophes poses substantial economic and societal challenges across Europe. As risks continue to grow, insurance coverage for such events remains insufficient, leaving individuals, businesses, and governments exposed to financial losses. This paper demonstrates how a European-level risk-sharing mechanism can deliver significant diversification benefits and enable more cost-effective funding, crowding in the private sector. This paper presents modelling results showing how efficiency gains from a European risk pool for natural perils – combined with a loan-based backstop – can enhance the overall risk-bearing capacity and substantially reduce the insurance protection gap.
Disclaimer:
The views expressed in this discussion paper are those of the authors and do not necessarily represent those of the ESM or ESM policy. No responsibility or liability is accepted by the ESM in relation to the accuracy or completeness of the information, including any data sets, presented in this paper.
Source: European Stability Mechanism | Discussion Papers | Volume 2024 no. 26 | April 2025 | 43 Pages
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