Insurance Europe has said there is no one-size-fits-all solution to the insurance required for natural and man-made disasters in Europe.
The European insurance and reinsurance federation was responding yesterday to a European Commission green paper, published in April, which sought to assess whether action at European Union level was appropriate or warranted to improve the market for disaster insurance.
The economic toll of disasters in the whole of Europe between 1980 and 2011 totalled 445bn (£385bn), according to the Green Paper on Insurance of Natural and Man-Made Disasters.
Storms surges, river and flash floods were one of the main natural disaster risks in Europe and with climate change, the green paper predicted, insurers would be asked to cover increasingly frequent and intense events
Insurance Europe welcomed the commission's recognition of the important role of reinsurance in disaster risk management. 'With large-scale disasters continually affecting economic stability and growth in Europe, Insurance Europe welcomes the European Commission's efforts to enhance disaster risk prevention and mitigation across the EU,' said Insurance Europe director general Michaela Koller.
In its detailed response to the green paper, Insurance Europe backed initiatives to facilitate and support increased coverage of disaster risks. These included access to more sophisticated risk data; public, private and government cooperation to minimise the growing impact of disasters; and minimising state intervention in markets where a risk was already insurable.
But, Insurance Europe said, natural and man-made disasters should be dealt with separately.
'Natural and man-made disasters require different approaches, as the insurability of each risk is affected by different factors and the ability to quantify the damage posed by each risk varies,' said Koller.
'Therefore Insurance Europe strongly recommends not mixing the EU discussions on man-made environmental disasters with those on natural catastrophes.'
The federation argued that predicting a natural catastrophe depended on scientific information 'obtained from risk models that evaluate and compare meteorological and geographical data, whereas the occurrence of an environmental pollution incident is more dependent on industrial company risk management and/or regional safety cultures (ie human behaviour).'
Property damage following a flood or storm could be calculated quite easily on a short-tail basis (ie during the policy period) while environmental risks were more long-tail, so it could take years to observe and calculate the extent of damage.
Different insurance markets handled each risk category and had developed their own expertise, Insurance Europe said.
'With respect to natural catastrophes, a flexible insurance market is optimal for ensuring the development of cover that more accurately meets localised risk exposure. Emphasis must also be placed on prevention methods in the form of adaptation to climate change (eg property flood defences, structural building codes, land-use planning and risk zoning) as well as preparedness in the form of government, municipal and public cooperation (eg organised emergency planning, efficient and effective crisis response, government cooperation with insurers to more rapidly contain damage).
'With respect to man-made disasters, a voluntary insurance market across Europe is the most suitable framework for accommodating the variety of liability needs posed by the level of safety standards and industrial operations of the various member states. Insurance Europe thus sees no need to harmonise financial security for this market at the EU level.'
Insurance Europe represents undertakings that generate premium income of more than 1,100bn in total and between them employ almost one million people.
