European Central Bank (ECB) Banking Supervision published a Supervision Newsletter article drawing on a workshop with EU banks, the European Insurance and Occupational Pensions Authority and the Banca d’Italia on insurance protection for immovable property taken as collateral. It links rising losses from extreme weather and a widening insurance protection gap to higher credit risk, and reiterates that the Capital Requirements Regulation requires banks to adequately insure immovable property used as collateral and to maintain procedures to monitor the adequacy of that insurance. The article highlights practical challenges at loan origination and throughout the loan life, including the mismatch between typically one-year insurance policies and longer loan maturities, wide variation in policy terms and hazard definitions, and limited inclusion of natural hazards such as floods in residential coverage. Monitoring after origination can be difficult where banks rely on borrowers to provide updated insurance information, with data protection rules adding complexity for residential portfolios, while commercial real estate lending tends to involve stricter insurance requirements and more regular information updates. Identified practices include centralised systems to store insurance data alongside collateral information, monitoring processes to detect expiring cover or changes in policy terms, more active borrower engagement to obtain updated insurance details, and use of collateral-focused metrics in risk scoring alongside traditional indicators. The workshop also surfaced options to improve data availability and monitoring, including potential national or EU-level databases for information on insured properties, closer bank-insurer collaboration on data sharing and standardised products, borrower education initiatives, and “impact lending” incentives to strengthen property resilience. The ECB notes that the practices discussed will feed into an updated version of its “Good practices for climate-related and environmental risk management”, to be published in line with planned supervisory-priority activities.
European Central Bank - Banking Supervision 2026-02-11
European Central Bank Banking Supervision outlines good practices for ensuring real estate collateral is adequately insured against natural hazards
The ECB Banking Supervision highlighted rising credit risk from extreme weather and insurance gaps for property collateral. It emphasized banks' need for adequate insurance coverage and monitoring, citing mismatched insurance terms and data issues. Proposed solutions include centralized data systems, enhanced bank-insurer collaboration, and borrower education to improve insurance monitoring and property resilience.