A few weeks ago, the AAE published a Discussion Paper titled “How to Close the Protection Gap and Increase Resilience against Climate Change”, prepared by the AAE Sustainability and Climate-Related Risks Working Group.
This paper examines Europe’s widening natural catastrophe protection gap – estimated at 50–75% of economic losses remaining uninsured – and sets out how it can be addressed through a coordinated, Europe-wide approach that combines expanded insurance coverage with meaningful investment in physical resilience. Drawing on analysis of the drivers and challenges facing policyholders, insurers, and governments, the paper explores the dynamics between these three key stakeholders that shape the current landscape: policyholders face unattractive financial payback periods for prevention measures and limited access to location-specific risk information; insurers encounter data and modelling constraints alongside difficulties in accurately quantifying the benefits of adaptation; and governments must navigate complex multi-level responsibilities while balancing short-term fiscal pressures with long-term resilience investment. Particular attention is given to the financial viability of micro-adaptation measures, the interaction between the current Solvency II framework and resilience incentives, and the role of public-private risksharing mechanisms in making coverage sustainable in high-risk areas.
