The European Insurance and Occupational Pensions Authority (EIOPA) and the European Stability Mechanism (ESM) have published a discussion paper on natural catastrophe risk management that quantifies the benefits of a European risk-sharing mechanism combining a natural catastrophe insurance pool and a loan-based backstop. The paper frames the proposal as a response to rising losses from extreme weather events and a material protection gap, with around 75% of past economic losses from natural catastrophes uninsured. It envisages a risk-based, premium-financed European natural catastrophe insurance pool to diversify risks across countries and perils, improve insurers’ capital efficiency, expand coverage, and help keep premiums affordable. A complementary loan-based backstop would provide additional funding for extreme tail events that exhaust the pool’s capacity, designed to be fiscally neutral by allowing the insurance industry to absorb costs over time without taxpayer funding, while reducing reliance on ad hoc public support and stabilising reinsurance costs without distorting private markets or weakening fiscal discipline.
European Insurance and Occupational Pensions Authority 2026-04-09
European Insurance and Occupational Pensions Authority and European Stability Mechanism publish discussion paper proposing a Europe-wide natural catastrophe insurance pool with a loan-based backstop
The European Insurance and Occupational Pensions Authority and the European Stability Mechanism have published a discussion paper proposing a European risk-sharing mechanism for natural catastrophe risk, combining a premium-financed insurance pool with a loan-based backstop. The mechanism aims to diversify risks across countries and perils, narrow the protection gap, improve insurers’ capital efficiency and premium affordability, and provide fiscally neutral funding for extreme events without ad hoc public support or distorting private markets.