Is It Time for an EU-Level Natural Catastrophe Insurance Scheme?

Morningstar DBRS has released a commentary discussing the benefits of national insurance schemes and an EU-wide private-public reinsurance scheme for natural catastrophes.

Key highlights include:

-- According to the European Insurance and Occupational Pensions Authority's (EIOPA) 2024 dashboard on insurance protection gap for natural catastrophes, only around 20% of the economic losses generated by natural catastrophes in the EU are insured, although there is a wide range of insurance gaps between countries.
-- The existence of national insurance schemes that cover specific natural catastrophe risks has helped reduce the insurance gap where implemented.
-- An EU public-private reinsurance scheme would have an active role in reducing the insurance gap while at the same time ensuring affordable insurance protection against natural catastrophes across Europe.

"In our view, the EU-level solution proposed by EIOPA would be beneficial for the financial strength of the insurance companies exposed to natural catastrophe risk and positive for their credit ratings", said Mario De Cicco, Vice President, Global Insurance & Pension Ratings at Morningstar DBRS. "The implementation of the EU public-private reinsurance scheme could provide additional reinsurance capacity in the market and a financial backstop for P&C insurance companies".