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Catastrophe insurance mitigates reconstruction losses by supplying prompt funding and supporting demand and investment, while its absence forces households and firms to rely on savings, credit, or uncertain public relief. Only about a quarter of climate-related catastrophe losses are insured in the EU, risking wider protection gaps, higher fiscal burdens, greater debt pressure, financial stability risks, and reduced credit provision.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/policy-options-to-reduce-the-climate-insurance-protection-gap-discussion-paper-april-2023/503545/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/policy-options-to-reduce-the-climate-insurance-protection-gap-discussion-paper-april-2023/503545.png","ImageObject",300,407,{"name":92,"@type":93},"kopisore","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-17","2026-10-03",true,{"@type":102,"interactionType":103,"userInteractionCount":24},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"Why is the climate insurance protection gap expected to widen in the EU?","Question",{"text":112,"@type":113},"Only about a quarter of climate-related catastrophe losses are currently insured. The gap could widen as events become more frequent and intense, making insurance repricing potentially unaffordable, thereby increasing government burdens and fiscal spending needs.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"How does catastrophe insurance reduce economic impacts after climate-related disasters?",{"text":117,"@type":113},"Insurance provides prompt funding for reconstruction, reducing uncertainty and supporting aggregate demand and investment. Without insurance, recovery relies more on savings, credit, and uncertain government relief, which is typically less efficient.",{"name":119,"@type":110,"acceptedAnswer":120},"What is the “ladder approach” proposed to address the protection gap?",{"text":121,"@type":113},"The approach allocates disaster losses across parties at different loss layers. It starts with private (re)insurance, may use reinsurance and catastrophe bonds, and then includes national and EU-level measures, including public-private partnerships and ex ante public backstops with safeguards to limit moral hazard.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},503545,1791552129,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":24,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":139,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":144,"read_time":145},962090880963,"https://ap-avatar.wpscdn.com/davatar_6f874abed73319feea01a86fa6f0fab8","Policy options to reduce the climate insurance protection gap  \nDiscussion Paper  \nApril 2023  \nContents  \nExecutive summary 2  \nIntroduction 5  \n1 The economic relevance of the climate insurance protection gap 9  \n1.1 Implications for the macroeconomy 9  \n1.2 Implications for the financial system 12  \n1.3 Fiscal implications 13  \n2 Potential policy measures to reduce the climate insurance  \nprotection gap – the ladder approach 16  \n2.1 Layer 1: Low to moderate loss layers: potential measures to enhance private insurance and impact underwriting 18  \n2.2 Layer 2: Higher loss layers: potential measures relating to  \nreinsurance and catastrophe bonds 19  \nBox 1 A closer look at the cat bond market 21  \n2.3 Layer 3: National measures – the role of the public sector 24  \n2.4 Layer 4: EU-level measures 28  \nBox 2 Addressing moral hazard 33  \n3 Complementarity with wider EU policy initiatives 36  \n4 Conclusion 38  \n5 Appendix 39  \n6 References 41  \nExecutive summary  \nExtreme weather and climate events can have significant macroeconomic implications. While the economic impact of such events in Europe has been manageable historically , it is expected to rise over time as catastrophes become more frequent and more severe due to global warming.  \nCatastrophe insurance is a key tool to mitigate macroeconomic losses following extreme climate-related events, as it provides prompt funding for reconstruction and should incentivise risk reduction and adaptation. The overall societal cost of a disaster depends not only on the severity of the initial damage but also on how swiftly reconstruction can be completed. However, reconstruction can be prolonged and may even be incomplete in the absence of sufficient resources. Insurance payouts reduce uncertainty and support aggregate demand and investment for reconstruction, enabling economies to recover faster and limiting the period of lower economic output. By contrast, without insurance, households and firms have to finance post-disaster recovery mainly with savings, credit and/or uncertain government relief, which is likely to be much less efficient.  \nOnly about a quarter of climate-related catastrophe losses are currently insured in the EU. This insurance protection gap could widen in the medium to long term as a result of climate change, partly because repricing of insurance contracts in response to increasingly frequent and intense events may lead to such insurance becoming unaffordable. This would further increase the burden on governments, both in terms of macroeconomic risks and in terms of fiscal spending to cover uninsured losses. This may raise government debt burdens of EU countries and increase economic divergence. A widening insurance protection gap may also pose financial stability risks and reduce credit provision in countries with large banking sector exposures to catastrophe risk events.  \nThis discussion paper sets out possible actions which should be considered to tackle this protection gap and mitigate catastrophe risks from climate change in the EU by means of insurance coverage and adaptation measures. These efforts should be complementary to ambitious mitigation policies to tackle climate change and reduce associated catastrophe risks, and should not be seen as a substitute for such policies. The actions discussed in this paper have been designed to fulfil the following main objectives:  \n• help provide prompt insurance claim pay-outs after a natural disaster;  \n• incentivise risk mitigation and adaptation measures;  \n• be complementary to existing insurance coverage mechanisms;  \n• require the sharing of costs and responsibilities across the relevant stakeholders to ensure “skin in the game” and reduce moral hazard;  \n• lower the share of economic losses from major natural disasters borne by the public sector over the long term.  \nThe paper uses the term “ladder approach” in the context of indicating the share of losses from natural disasters borne by various parties at di","cbCais0YF6vHRSJY","https://ap.wps.com/l/cbCais0YF6vHRSJY","pdf",798897,48,"English","# Executive summary\n# Introduction\n# Economic relevance of the climate insurance protection gap\n## Implications for the macroeconomy\n## Implications for the financial system\n## Fiscal implications\n# Potential policy measures: the ladder approach\n## Layer 1: Low to moderate loss layers\n## Layer 2: Higher loss layers\n## Layer 3: National measures\n## Layer 4: EU-level measures\n# Complementarity with wider EU policy initiatives\n# Conclusion\n# Appendix\n# References","[{\"question\":\"Why is the climate insurance protection gap expected to widen in the EU?\",\"answer\":\"Only about a quarter of climate-related catastrophe losses are currently insured. The gap could widen as events become more frequent and intense, making insurance repricing potentially unaffordable, thereby increasing government burdens and fiscal spending needs.\"},{\"question\":\"How does catastrophe insurance reduce economic impacts after climate-related disasters?\",\"answer\":\"Insurance provides prompt funding for reconstruction, reducing uncertainty and supporting aggregate demand and investment. Without insurance, recovery relies more on savings, credit, and uncertain government relief, which is typically less efficient.\"},{\"question\":\"What is the “ladder approach” proposed to address the protection gap?\",\"answer\":\"The approach allocates disaster losses across parties at different loss layers. It starts with private (re)insurance, may use reinsurance and catastrophe bonds, and then includes national and EU-level measures, including public-private partnerships and ex ante public backstops with safeguards to limit moral hazard.\"}]","Policy options to reduce the climate insurance protection gap - Discussion Paper - April 2023 | PDF",1791057915,121]