I would like to welcome all participants to the workshop on understanding climate-change risks for insurance.
The topic of climate risk in the financial sector has become one of central focus for industry, supervisors and policy makers throughout Europe. In terms of risk analysis, it is a relatively new topic where we are continuously learning as new expertise and progress in science is becoming available.
Not surprisingly, the topic become one of the central point also in the EIOPA agenda. We have been working on all aspects that affect our work in all areas – oversight, policy, consumer protection and last but not least financial stability, which is the area we will focus on today.
The recent experience when financial markets were hit by the COVID-19 pandemic shows how important the topic of financial stability is. Policy makers reacted strongly to the risks faced with new measures affecting both own private and work lives, and also with measures to support the economy and financial markets. However, the urgency seen during the pandemic is not really matched when it comes to dealing with climate-change, possibly because of the long-term nature of those risks. For us as supervisors, however, the fact that risks are more long term does not make them less important. Climate risk will have long lasting consequences that are becoming more and more prominent.
This year, we expect to reach record high losses for natural catastrophes, well above the long-term average for the global insurance and reinsurance industry. Moreover, this time we have not only experienced hurricanes and wildfire losses in US (far from us), but also various regions in Western and Central Europe suffered severe weather events and disastrous flooding that led to significant damage to public and private property and the loss of lives.
This has further confirmed the importance of climate change risk and its impact on insurers. Moreover, almost two thirds of world natural disasters in 2020 were uninsured showing huge protection gap. In this context, the insurance sector has a key role to play in mitigating the impact of future natural catastrophes through adaptation.
However, climate change is not only about physical risk affecting insurers’ liabilities, we have to keep in mind that also assets could be affected due to transition risk. Moreover, insurers and pension funds are long-term investors due the nature of their business with long-term liabilities. Hence, they should be key players in providing funds to help with the transition towards the low-carbon economy.
EIOPA has been at the forefront of the developments in the area also from the financial stability perspective and much work has been already done that will be further discussed in this seminar.
I would like to stress that in order to further progress we have to leverage on all expertise available, not only among EIOPA members, but also the industry and especially academia that could provide the theoretical framework and empirical models to deal with all challenges we are facing.
I am very pleased to see that we have so many participants today and this shows that this topic is highly relevant for national supervisors and financial stability experts.
I wish you a very fruitful discussion today and a lot of new ideas and inspirations that can help us with the joint effort to tackle climate risk.