Jurisdiction(s):
Ireland

EU proposals to close the natural catastrophe insurance protection gap: EIOPA and ECB's two-pillar model of public-private reinsurance and a public disaster fund

Published on: 23 January 2025

Published by a LexisNexis Ireland - Banking & Financial Services expert

Legal News

Article summary

The European Insurance and Occupational Pensions Authority (EIOPA) has, for years, warned about a widening ‘natural catastrophe insurance protection gap’ across the EU. This gap captures the mismatch between overall losses caused by natural disasters and the portion of those losses that are insured. According to EIOPA and the European Central Bank (ECB), from 1981 to 2023 natural catastrophes cost EU member states €900bn, with one fifth of that bill arising in just the most recent three years. Over the same period, only around a quarter of losses were insured, and that proportion is falling. We have previously outlined EIOPA’s worries about the consequences of this catastrophe gap (see here). In this article, we examine the actions that EIOPA and the ECB now formally propose to narrow the protection gap, as set out in a paper issued on 18 December 2024 (the 2024 Paper). In brief, the proposals (explained further below) rest on two pillars: a public–private, EU‑wide reinsurance facility (designed to complement existing national insurance schemes in some member states) and an EU public disaster fund aimed at supporting the reconstruction of public assets. Together, these steps seek to bolster resilience and materially close the cover shortfall.

Background EIOPA

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