Insurers across the EMEA region are increasingly seeking broader access to natural catastrophe insurance, often with the backing of state-supported reinsurance schemes, according to Fitch Ratings.
These state-backed reinsurance schemes (SBRS) provide insurers with additional capacity and financial support, enabling them to maintain and sometimes expand coverage for extreme weather events.
Fitch notes that government-supported programs are expected to become more prevalent, as they typically offer reinsurance for large-scale events that may exceed the capacity of the private market. State involvement often includes guarantees or financial backstops, shielding insurers from outsized natural catastrophe losses.
Premiums for catastrophe insurance tend to be more stable and lower when a state-backed scheme spreads risk and subsidizes costs, ensuring continued availability of coverage even after severe events. Fitch considers effective SBRS to be supportive of broader access to catastrophe insurance.
SBRS also play a role in protecting insurer solvency and enhancing the insurability of large-scale risks. Fitch points out that state involvement helps stabilize the insurance market after major disasters, reducing the risk of insurer failure and maintaining sector confidence.
In Spain, the Consorcio de Compensacion de Seguros (CCS) has played a significant role in stabilizing the insurance market during climate-related disasters. The CCS, a government-managed entity funded by mandatory surcharges on insurance policies, covers losses from natural perils and socio-political risks.
Since 1987, it has paid out €10.6 billion in compensation for extraordinary risks, with about 70% of payouts linked to flood events. The CCS model has helped maintain a 94% average combined ratio for multi-risk property insurance between 2014 and 2023, even as weather-related claims have increased.
France’s Cat Nat scheme, managed by Caisse Centrale de Réassurance (CCR), provides another example of state-backed support. The Cat Nat system mandates that insurers offer coverage for natural disasters and provides unlimited reinsurance guarantees, with CCR able to cover up to 100% of losses above a defined threshold.
Meanwhile, Italy is set to introduce mandatory natural catastrophe insurance for small and medium-sized enterprises (SMEs) in 2025. Under the proposed framework, SACE, a publicly controlled entity, will reinsure up to 50% of indemnities.
Fitch notes that this measure aims to improve market stability and expand insurance coverage for Italian businesses, though the transition will require time as SMEs adapt to the new requirements.
Despite these efforts, Fitch expects that protection gaps will persist due to differences in public awareness, affordability, and the perceived value of coverage. Even robust schemes may be tested by extreme or compound disasters, exposing vulnerabilities and reinforcing the gap.
Addressing this issue requires collaboration among governments, insurers, and other stakeholders to improve risk assessment, promote insurance awareness, and expand coverage options.
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