EIOPA-ECB proposal for a European natural catastrophe system (2024)
A two-pillar proposal: a public-private reinsurance scheme pooling catastrophe risks across the EU, and a fund from member states to rebuild public infrastructure.
A national natural catastrophe regime pools risks within one country, but a major earthquake or exceptional flood can exceed its capacity, and some countries have no regime at all. The proposal by EIOPA and the European Central Bank takes pooling one level higher. The first pillar is a European public-private reinsurance scheme, funded by risk-based premiums paid by insurers or national schemes, which diversifies perils across countries. The second is a fund financed by member states to rebuild public infrastructure after a disaster, provided the state had put agreed prevention measures in place before the event. That condition targets moral hazard: without it, European solidarity would remove the incentive to prevent.
Released on December 18, 2024, the joint paper builds on a first discussion paper from 2023; EIOPA chair Petra Hielkema presented it as a basis for discussion on reducing the protection gap while preserving national schemes. It is a proposal, not adopted legislation.
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