EU regulators push for disaster insurance pool as wildfires rage across Europe

As wildfires this week threatened the outskirts of Bordeaux and Madrid — forcing more than 300,000 people from their homes and burning over 160,000 hectares across France and Spain — European financial regulators are pressing Brussels to act on a growing insurance crisis driven by climate change.eenews+2

A Protection Gap of 75 Percent

The European Insurance and Occupational Pensions Authority (EIOPA) and the European Stability Mechanism (ESM) published a discussion paper in April proposing a continent-wide natural catastrophe insurance pool backed by a loan-based public backstop. The proposal builds on a December 2024 joint paper from EIOPA and the European Central Bank calling for an EU-level public-private reinsurance scheme and a separate disaster fund financed by member state contributions.brusselssignal+3

The core problem: only about a quarter of economic losses from natural catastrophes across the bloc have been insured since 1980, according to EIOPA. The authority's modelling suggests that a European pool could reduce this protection gap from 75 percent to roughly 10 percent, though the backstop would require up to €65 billion in capacity. EIOPA chairperson Petra Hielkema has warned of "insurance deserts" forming in high-risk regions where insurers withdraw coverage entirely.eiopa.europa+1

Industry Response and Capital Markets

Not all parties agree on the approach. Finance Watch, a Brussels-based campaign group, has argued the design would "mutualise losses without reducing underlying risks" and called for greater investment in prevention. Ratings agency Morningstar DBRS ↘ 0.28% judged the plan modestly positive for private insurers, since it would complement rather than displace national schemes.brusselssignal

On the capital markets side, SCOR CEO Thierry Léger said during the company's earnings call on July 30 that wildfire catastrophe bonds remain limited by underdeveloped risk models. "The models are very little-developed today, and to do ILS type of covers you really need reliable models," Léger said, adding that "the quantity of ILS issuances will increase only with the quality of modelling."artemis

What Comes Next

The European Commission is due to bring forward a climate resilience and risk management proposal later in 2026. France has already raised the compulsory surcharge funding its national CatNat disaster scheme from 12 to 20 percent in January 2025, while Germany's insurance association has warned that property premiums could double within a decade. With wildfires still threatening southern Europe and temperatures forecast to remain extreme, the political pressure for a coordinated EU response is mounting.bbc+2