Climate Adaptation and the Insurance Protection Gap: Market Challenges and Policy Options

As climate-related risks escalate, rising hazards and exposures increasingly threaten the availability and affordability of insurance coverage. Individuals and businesses face a growing insurance protection gap, which may trigger insurance market failures and systemic contagion to the financial system, with widespread economic, fiscal, and social consequences.

Traditional insurance market mechanisms and micro-prudential regulation primarily focus on short-term risk and capital management, whereas safeguarding long-term financial stability requires systems-thinking and coordinated policy and regulatory solutions. Policymakers, financial supervisors, and other insurance stakeholders must collaborate to bridge this divide, ensuring that insurance markets serve as enablers of climate adaptation, rather than exacerbating economic vulnerabilities and social inequality.

Against this background, the Council on Economic Policies organizes an online roundtable with policymakers, market practitioners, and further insurance stakeholders from Europe to explore the structural challenges underlying the climate insurance protection gap, the complementarities and potential tensions between micro-prudential and macroprudential regulatory approaches, and the policy options to mitigate this gap.

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