A report released today outlines a set of recommendations aimed at reducing the climate change protection gap — the difference between economic losses and insurance coverage.
The report is the result of the Climate Resilience Dialogue, a European Commission initiative launched in 2021, which brought together various stakeholders, including the insurance sector.
The report recognises the growing intensity and frequency of natural disasters caused by climate change. Currently, only about 25% of climate-related losses in Europe are insured, though there are significant variations across countries.
Nicolas Jeanmart (pictured above) of Insurance Europe, a co-rapporteur of the report, noted that climate change poses a significant challenge to the insurance industry’s ability to continue offering broad, affordable protection.
He pointed out that to maintain the industry’s role, there is a need to reduce greenhouse gas emissions and strengthen community resilience. He emphasised the importance of collaboration between insurers, consumers, businesses, and policymakers in addressing these challenges.
The report offers several key recommendations to address the climate protection gap. These include increasing risk awareness by developing accessible tools tailored to local needs, leveraging data for accurate risk assessments, and advising policyholders to implement adaptation measures.
The report also calls for shared responsibility among stakeholders to enhance resilience, as well as exploring public-private partnerships or subsidies as potential solutions.
Insurance Europe, the federation of European insurance associations, has echoed these recommendations in its recent demands to the European Union, reaffirming the industry's role in tackling the impacts of climate change.
The report highlights that 2023 marked the warmest year on record, with Europe warming at twice the global average since the 1980s. This rise in temperatures, coupled with more frequent and severe weather events, has contributed to increased economic losses. Without a corresponding increase in climate resilience, these trends are expected to widen the existing protection gap.
The Climate Resilience Dialogue, established by the European Commission, gathered insights from discussions aimed at narrowing the climate protection gap and increasing economic and social resilience to climate change.
The report emphasises that low risk awareness and limited access to relevant information are key factors contributing to the gap. It recommends the development of tools that offer clear information on risks and preventive measures, adapted to local conditions.
Accurate risk assessments are also essential, according to the report, which stresses the importance of robust and accessible data for evaluating hazards and informing risk reduction strategies. Forward-looking risk assessments that consider long-term climate scenarios are particularly necessary, as climate risks are complex and not easily predicted using historical data alone.
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