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European Insurance and Occupational Pensions Authority

Addressing protection gaps

(Natural) catastrophes have a damaging effect on society and cause significant losses.

To improve the resilience against sustainability risks and reduce losses, EIOPA works to improve the awareness of risk that consumers face and to foster adaptation measures across public and private initiatives.

This entails further developing macro-prudential considerations in the analysis of protection gaps as well as further considerations on solutions to effectively address demand-side issue to ensure that products, when available, are taken up by consumers.

EIOPA Insurance

Measuring protection gaps

EIOPA is providing insurers and public authorities with analysis on what causes protection gaps and how significant they are. This is a first step to enable informed policy-measures on protection gaps.

EIOPA is collecting and sharing data and promotes a better understanding and development of NatCat models to evaluate risks. This increases the awareness of risks and contributes to a better supervision of cat risks.

Incentivising risk prevention

Adaptation and risk mitigation measures (‘risk prevention’ measures) can help reduce policyholders’ physical risk exposure to NatCat events and prevent damages and losses arising from such catastrophes.

Insurers can integrate incentives for risk prevention in their product design as well as underwriting and pricing practices to achieve a positive impact on the amount and number of losses (‘impact underwriting’).

EIOPA aims to:

  1. raise awareness on the benefits of risk prevention
  2. inform and encourage consumers to invest in risk prevention measures
  3. implement supervisory measures to incentivise transparent risk-based pricing by insurers

 

Addressing obstacles to the take-up of insurance by consumers

EIOPA strives to help consumers better understand the value and the importance of insurance so that they better understand what type of insurance coverage they need to purchase.

Increasing financial literacy can help consumers make better decisions and build resilience to financial shocks.

EIOPA aims to support the take-up of insurance by consumers, by identifying the main obstacles and ensure insurance products are clear and understandable on the scope of coverage.

Shared resilience solutions, in the context of the COVID-19 pandemic

Tackling insurance protection gaps requires the sharing of costs and responsibilities across the relevant parts of the private and public sector in a meaningful and coordinated manner. Solutions should be conditional upon implementing efficient and effective prevention and adaptation measures.

The concept of shared resilience solutions originated from EIOPAs work on addressing business interruption risk in the context of the COVID-19 pandemic. The features of a shared resilience solution can apply to systemic risks causing significant adverse effects to public health or safety, the economy or national security, including climate change or cyber risk.