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The EU Green Paper on the insurance of natural and man-made disasters

Like many other regions of the world, the European Union is vulnerable to nearly all types of natural disasters. Disasters not only cause human losses but also damage to the value of billions of euros every year, affecting economic stability and growth. Disasters may have cross-border effects and can potentially threaten entire areas in neighbouring countries. Even where costs of major disasters are locally concentrated, if costs are inadequately covered by insurance then individual Member States may carry large fiscal burdens, which could cause internal and external imbalances. This is thus an important issue for citizens, companies and governments across the Union.

The Green Paper poses a number of questions concerning the adequacy and availability of appropriate disaster insurance. The objective is to raise awareness and to assess whether or not action at EU level could be appropriate or warranted to improve the market for disaster insurance in the European Union. More generally, this process will also expand the knowledge base, help to promote insurance as a tool of disaster management and thus contribute to a shift towards a general culture of disaster risk prevention and mitigation.

Internal Market and Services Commissioner Michel Barnier said “Natural and man-made catastrophes are on the rise, while the capacity of the insurance sector to insure against them is not fully utilised. European-level solutions to bridge the insurance gap need to be explored, along with common means of prevention and ways of raising awareness among citizens and companies. This Green Paper launches an important debate on the issues and will also allow us to get a more complete overview of the situation in different Member States.”

Kristalina Georgieva, European Commissioner for International Cooperation, Humanitarian Aid and Crisis Response, said: "Well-designed insurance policies can also work as a market-based instrument to discourage risky behaviour and promote risk awareness and mainstream disaster-proofing in economic and financial decisions."

Strategy focuses on three key objectives
- Promoting action by Member States: The Commission will encourage all Member States to adopt comprehensive adaptation strategies (currently 15 have strategies) and will provide funding to help them build up their adaptation capacities and take action. It will also support adaptation in cities by launching a voluntary commitment based on the Covenant of Mayors initiative.
- ’Climate-proofing’ action at EU level by further promoting adaptation in key vulnerable sectors such as agriculture, fisheries and cohesion policy, ensuring that Europe’s infrastructure is made more resilient, and promoting the use of insurance against natural and man-made disasters.
- Better informed decision-making by addressing gaps in knowledge about adaptation and further developing the European climate adaptation platform (Climate-ADAPT) as the ’one-stop shop’ for adaptation information in Europe.

The European Commission’s aim is to improve the market penetration of natural disaster insurance and to unleash the full potential of insurance pricing and other financial products for risk awareness prevention and mitigation and for long-term resilience in investment and business decisions.

The Green Paper on the insurance of natural and man-made disasters (CION 2013127), adopted together with the Strategy, is a first step in encouraging insurers to improve the way they help to manage climate change risks. Stakeholder discussions with the insurance and bank sectors on the basis of the Green Paper have been initiated.

Source: European Commission

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