The European Insurance and Occupational Pensions Authority (EIOPA) and the European Stability Mechanism (ESM) have published a paper on natural catastrophe risk management with a proposed a shared backstop of €10bn to €65bn.

The proposed mechanism aims to reduce the EU’s significant protection gap, which in the past left around 75 per cent of economic losses from natural catastrophes uninsured, and to strengthen the continent’s resilience against increasingly frequent and severe natural disasters like floods, droughts, storms and wildfires.

Primary insurers, reinsurers, market-based solutions, and, where available, national schemes should continue to play a key role in spreading the risk of natural catastrophes. However, their capacity may not be sufficient to absorb losses from large-scale disasters, which are becoming more likely in a warmer climate.

Although a move that might add a layer of protection, it does, in itself, reveal the immediate and potential climate damage from natural events, and the cost of these.

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