Summary of key points

  • Insurance is one tool amongst others in a holistic natural disaster risk management strategy. Risk transfer alone, without consideration of risk reduction efforts, is not a sustainable solution going forward, particularly in the context of a changing climate.
  • A wide variety of insurance penetration rates across the EU exists, and more data is needed in order to assess the underlying factors that drive demand for and supply of disaster insurance. What emerges from the experience of natural catastrophe insurance around the EU is that there is no ‘one size fits all’ solution.
  • In theory risk-based pricing should help prevent moral hazard and promote risk reduction behavior. Evidence of how this works in practice is limited. Due to affordability concerns this may have to be linked to public financial support measures at least on a temporary basis.
  • There is evidence of a range of further activities conducted by the insurance industry to foster disaster prevention efforts, but it remains unclear to what extent they are effective at household level and to what extent they could be scaled up if deemed a success.
  • Other actors, such as property developers, home-builders and mortgage providers, should be considered alongside homeowners and tenants when tackling moral hazard and enhancing risk reduction efforts through insurance.
  • A greater degree of product innovation both for public and private disaster insurance schemes should be fostered.
  • The EU’s efforts to support development of disaster insurance in developing countries should have a clear focus on linking risk transfer and risk reduction.

Swenja Surminski and Florence Crick

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