Scientists believe that natural disasters will increase in frequency and severity as global temperatures rise, but currently only about a quarter of damages due to natural catastrophes in the EU are covered by an insurance policy.
With such scant coverage leaving people, businesses and governments exposed to major economic risks, the ECB and the European Insurance and Occupational Pensions Authority (EIOPA) proposed a two-pronged solution.
The first would be to create an EU-wide reinsurance scheme for natural catastrophe coverage to help expand availability and ensure affordability.
"By pooling private risks and perils across the EU, this scheme would exploit economies of scale and diversify the coverage of high risks at the European level," they said in a joint statement.
The second element would be to create an EU-wide fund to help member states rebuild public infrastructure following natural disasters.
"Recent events in Europe have shown the challenges the EU and its Member States are facing in dealing with natural catastrophes," EIOPA's chairwoman Petra Hielkema said in the statement.
"This calls for coordinated action," she added.
Reinsurer SwissRe earlier this month estimated that intense flooding in Europe caused around $10 billion in insured losses this year, pointing to the major floods in the wake of Storm Boris in Central Europe in September and the devastating floods in Spain in October that killed at least 230 people.
The paper is meant to spur debate and eventual action by European policymakers.
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