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EU-US INSURANCE DIALOGUE PROJECT

CLIMATE RISK AND RESILIENCE WORKSTREAM

June 2023 Summary Report

I. Introduction and Background

The EU-US Insurance Dialogue Project established the EU-US Climate Risk and Resilience 

Workstream to further the understanding of insurance laws, regulations, supervisory practices 

and initiatives on climate risk and resilience across the EU and the US. The EU and US agreed 

that this workstream would focus on the following areas: the regulatory treatment of: (1) 

innovative technology to cover climate-related risks; (2) pre-disaster mitigation and adaptation 

efforts; and (3) the modelling and data challenges for managing natural catastrophes. The 

workstream met five times during 2022 and covered all areas of focus.

Conscious of the fact that climate risk and resilience would remain a pressing matter for society 

and regulators in the years to come, the workstream anticipated that future exchanges would 

continue to be relevant. While making progress in furthering a common understanding on the 

areas listed, the workstream also aimed to identify areas of common ground for potential future 

exchanges.

II. Summary of Discussed Topics

A. The role of financial innovation in contributing to improve insurance coverage 

for climate change related risks: the case of parametric insurance coverage.

To address the insurance protection gap for natural catastrophes and climate related risks, 

pursuing options to increase insurance penetration can contribute to reducing climate change 

related losses.

The workstream shared the common understanding that parametric insurance solutions can 

offer an opportunity for broader coverage and immediacy of pay-outs. As such, they can 

provide a complementary solution to contribute to post-event resilience. On the other hand, 

there is an important risk of losses not being covered where the event trigger for coverage has 

not been met. While traditional indemnity insurance pays out a claim based on the value of the 

loss suffered, parametric insurance policies pay out only upon the occurrence of specified 

events. The most obvious downside to a parametric insurance policy is basis risk. The 

economic losses of the insured could differ from the amount of coverage, or the insured could 

have losses without the parameter being triggered. The regulatory treatment of these products 

may differ across jurisdictions; depending on whether there is a legal requirement for an 

insurable interest (i.e., some element of indemnity/loss evidenced) the product may qualify as 

an insurance product or, for example, a derivative. 

The workstream noted that the difficulty in defining objective relevant parameters for 

triggering coverage is among the key challenges of parametric coverage. Improved modelling, 

the sharing of knowledge on loss experience, and effective loss prevention measures between 

public and private actors could contribute to aligning incentives for risk prevention measures 

for community-based risk sharing solutions. 
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The workstream exchanged views on examples of parametric solutions addressing climate 

change related risks, ranging from public-private cooperation aiming at filling gaps in 

insurance availability for large systemic risks (e.g., affecting agriculture or utilities) to smart 

insurance contracts aiming at automatically refunding policyholders for small amounts, for 

example as part of travel insurance.

Workstream members discussed initiatives for a parametric storm insurance policy by an 

energy provider offering coverage for transmission and distribution infrastructure damage 

caused by severe storms (US, Connecticut)1 and a public-private initiative of the state and 

academia to seek parametric insurance coverage for flood-related damage at the community 

level (US, New York)2. Further examples included parametric crop insurance coverage for 

damage due to drought or excessive rainfall, facilitated by a regional government in partnership 

with an insurer (EU, Belgium)3 or smart policies linked to the travel sector, covering the risk 

of bad weather, flight delays and luggage de-routing (EU, Italy)4

. 

Considering the COVID-19 pandemic, the workstream exchanged views on the insurance 

coverage gap for business interruption losses. Members were of the common view that 

parametric solutions for such pandemic risk coverage face important challenges when it comes 

to defining relevant and objective parametric triggers for business interruption. Triggers based 

on government measures are potentially fraught with moral hazard or carry important basis 

risk. The lack of modelling of socio-economic impacts of the pandemic and its secondary 

effects limits the effectiveness of parametric solutions5

. 

B. Features of product design and underwriting that can incentivize climate change 

adaptation/mitigation. 

The insurance protection gap for natural catastrophes is likely to grow due to the expected 

increase in climate-related physical risk exposure over the next decades following increased 

frequency and severity of natural catastrophes. 

The workstream shared a common understanding that adaptation/mitigation to climate change 

is needed to reduce climate-related insurance losses.6 The workstream noted that climate 

adaptation/mitigation through insurance solutions can happen through structural measures and 

services implemented before a loss event to reduce the policyholder’s physical risk exposure. 

1 Steve Evans, “Arbol launches climate parametric insurance captive in Connecticut,” Artemis (5 August 2022), 

https://www.artemis.bm/news/arbol-launches-climate-parametric-insurance-captive-in-connecticut/.

2 New York City Mayor’s Office of Climate & Environmental Justice, “MOCEJ and CNYCN Launch 

Innovative Pilot to Address Flooding,” news release (March 6, 2023), https://climate.cityofnewyork.us/mocejand-cnycn-launch-innovative-pilot-to-address-flooding/.

3 See Fédération Wallonne de L'Agriculture, Les produits d'assurance paramétrique (26 March 2020),

https://www.fwa.be/cultures/les-produits-dassurance-parametrique.

4 NetworkDigital360, “Parametric policies: here is the innovative blockchain testing” (18 July 2019), 

https://www.insuranceup.it/en/business/parametric-policies-here-is-the-innovative-blockchain-testing/. 

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EIOPA, EIOPA Staff Paper on Measures to Improve the Insurability of Business Interruption Risk in Light of 

Pandemics, (12 February 2021), https://www.eiopa.europa.eu/publications/eiopa-staff-paper-measures-improveinsurability-business-interruption-risk-light-pandemics_en. 

6 To note: US workstream members use the term mitigation for this loss reduction, whereas in the EU context, 

mitigation aims at reducing the probability of the risk materialising, e.g., applied to climate risk, through 

reduction of GHG emissions in the first place.
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Innovative product design and a risk-based prudential treatment of insurance underwriting that 

incentivizes climate change adaptation may be an opportunity to seek to reduce losses and 

ensure future affordability and availability of insurance for climate change related risks.

To illustrate these points, the workstream discussed the challenges associated with short-term 

non-life contracts and annual re-pricing in the context of climate change. Higher physical risk 

exposures lead to higher risk-based premium levels, with a negative impact on long-term 

affordability and availability of insurance coverage against climate-related hazards.7 The 

reduction in insurance availability would increase the already existing natural catastrophe 

insurance protection gap, which EIOPA is monitoring through its dashboard on insurance 

protection gap for natural catastrophes.8 In this context, EIOPA explained its analysis of pricing 

and underwriting in an ongoing pilot exercise on impact underwriting.9 

A further step is being taken by the California Department of Insurance, whose Climate Smart 

Insurance Products database10 aims to increase consumers’ awareness of available products

and to inspire insurers to innovate. Products listed include climate adaptation measures to 

incentivize consumers to “build back better”, as well as requirements for greenhouse gas 

emission mitigation measures, such as fuel efficiency or green energy certification. California 

recently adopted regulations that require insurance companies to factor consumer and business 

wildfire safety actions into their pricing of residential and commercial coverage.11 The

regulations also provide consumers with transparency about the wildfire risk score that 

insurance companies assign to properties.12

With a focus on risks prone to protection gaps and the ensuing need for prevention measures 

and increased risk awareness, workstream members discussed the risk of wildfire, extreme 

heat, and flooding. Members referred to the recently published UN wildfire report13, which 

discusses the mutually exacerbating effect of wildfires and climate change and calls on 

governments to focus on prevention and preparedness. New legislation in California introduced 

a heat wave ranking,

14 to increase awareness on the risks of heat illness and death and 

incentivize appropriate prevention measures. The Federal Emergency Management Agency 

7 EIOPA, Report on non-life underwriting and pricing in light of climate change (8 July 2021), 

https://www.eiopa.europa.eu/publications/report-non-life-underwriting-and-pricing-light-climate-change_en. 

8 EIOPA, Dashboard on insurance protection gap for natural catastrophes (updated in December 2022),

https://www.eiopa.europa.eu/tools-and-data/dashboard-insurance-protection-gap-natural-catastrophes_en. 

9 EIOPA, Impact underwriting: Report on the Implementation of Climate-Related Adaptation Measures in NonLife Underwriting Practices (6 February 2023), https://www.eiopa.europa.eu/publications/impact-underwritingreport-implementation-climate-related-adaptation-measures-non-life-underwriting_en. 

10 California Department of Insurance, Climate Smart Products Search, 

https://interactive.web.insurance.ca.gov/apex_extprd/f?p=142:1. 

11 California Department of Insurance, “Commissioner Lara enforces nation’s first wildfire safety regulation to 

help drive down cost of insurance,” press release (October 17, 2022), https://www.insurance.ca.gov/0400-

news/0100-press-releases/2022/release076-2022.cfm (California Insurance Department, “Commissioner Lara 

enforces nation’s first wildfire safety regulation.”).

12 Title 10, California Code of Regulations, Section 2644.9.

13 UN Environmental Programme, “Number of wildfires to rise by 50% by 2100 and governments are not 

prepared, experts warn,” press release (23 February 2022), https://www.unep.org/news-and-stories/pressrelease/number-wildfires-rise-50-2100-and-governments-are-not-prepared. 

14 California Department of Insurance, “First-in-nation legislation for early warning and ranking of extreme heat 

waves introduced in California Assembly,” press release (February 16, 2022), 

http://www.insurance.ca.gov/0400-news/0100-press-releases/2022/release018-2022.cfm. 
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established a Community Rating System to incentivize community-level flood mitigation 

through premium discounts on flood policies purchased through the National Flood Insurance 

Program (NFIP). Other initiatives for risk assessment and alignment for risk prevention 

measures across public and private initiatives include the Floodlabel tool,

15 which allows for 

flood risk assessment by homeowners, and the Alabama wind credit programme for fortified 

homes.16 

At the federal level in the United States, FIO, as a member of the Mitigation Framework 

Leadership Group (MitFLG), supported MitFLG’s implementation of its National Mitigation 

Investment Strategy.17 In 2022, MitFLG’s work focused on assisting the implementation of the 

Infrastructure Investment and Jobs Act (IIJA) (also known as the Bipartisan Infrastructure Act), 

which was enacted in 2021 and provides $1.2 trillion to federal agencies in support of wideranging new and improved infrastructure.18 The IIJA includes funding for federal infrastructure 

resilience programs, such as the Department of Transportation’s Promoting Resilient 

Operations for Transformative, Efficient, and Cost-saving Transportation Program, the Federal 

Emergency Management Agency’s Building Resilient Infrastructure and Communities 

Program, and the Department of Energy’s Preventing Outages and Enhancing the Resilience 

of the Electric Grid Program, as well as billions of dollars allocated to states for roads and 

highways, bridges, ports, airports, and water systems.

19 MitFLG member agencies worked 

together to prepare for the funding under that IIJA to ensure that new and existing programs 

complemented each other in support of whole community resilience. 

C. Pre-disaster mitigation and adaptation: public-private measures.

Following from the discussions on product design and the incentives for climate risk 

mitigation/adaptation to improve the loss experience via underwriting standards, members of 

the workstream engaged in further discussion on public measures such as standardised land use 

and building codes to reduce losses, which can then in turn be reflected in lower insurance 

premiums. 

The members of the workstream noted that insurance supervisors can play a role in pre-disaster 

risk management in various ways, including by contributing to improve risk awareness of 

consumers, ensuring access to and take-up of prevention measures and relevant insurance 

solutions, or incentivizing insurers to reflect loss reducing measures in their price-setting. 

Stakeholder cooperation is essential in realizing the benefits to the industry, supervisors, and 

the general public of reducing future loss. Sharing of data is an important element of such 

15 Utrecht University, Floodlabel: A smart tool for governance towards flood-resilient cities, 

https://www.uu.nl/en/research/human-geography-and-planning/floodlabel-a-smart-tool-for-governance-towardsflood-resilient-cities. 

16 Strengthen Alabama Homes, https://strengthenalabamahomes.com/.

17 MitFLG provides a coordinating structure for mitigation across the federal government and with partners in 

mitigation nationally. MitFLG is composed of federal and state, local, tribal, and territorial public sector 

representatives.

18 FEMA, Mitigation Framework Leadership Group 2022 Year in Review, 1 (January 2023), 

https://www.fema.gov/sites/default/files/documents/fema_mitflg-year-review_2022.pdf (MitFLG 2022 Year in 

Review); Biden Administration Releases Bipartisan Infrastructure Law Guidebook for State, Local, Tribal and 

Territorial Governments, The White House (January 31, 2022), https://www.whitehouse.gov/briefingroom/statements-releases/2022/01/31/biden-administration-releases-bipartisan-infrastructure-law-guidebookfor-state-local-tribal-and-territorial-governments/. 

19 Infrastructure Investment and Jobs Act, Public Law 117-58 (November 15, 2021), 

https://www.congress.gov/bill/117th-congress/house-bill/3684/text.
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multi-agency cooperation. EIOPA published jointly with the European Central Bank a 

discussion paper outlining public and private policy options to tackle the insurance natural 

catastrophe protection gap. The options are aimed at boosting the uptake and efficiency of 

climate catastrophe insurance while creating incentives to adapt to and reduce climate risks.20

The US workstream members presented the objectives of the NAIC Climate and Resiliency 

Task Force’s workstream on pre-disaster mitigation. EIOPA introduced its framework for 

shared resilience solutions. To improve pre-disaster risk mitigation, shared resilience solutions 

would build on access to data and modelling of risks, incentives for mitigation and adaptation, 

and improved risk assessment and coordinated action on prevention measures as a prerequisite 

for public-private risk transfers.

Examples were shared of various US public-private initiatives to improve awareness of 

exposures to climate-related risks and take up of insurance or incentives for mitigation and 

adaptation. The Maryland Insurance Administration's (MIA) Consumer Education and 

Advocacy Unit coordinates educational campaigns to promote Marylanders' awareness of 

exposures to climate-related risks and advocates for the uptake of insurance. US state insurance 

departments’ regulatory assessment of insurance rates also consider their adequacy, fairness, 

and whether they are excessive. This can include the reflection in the pricing of loss reductions 

generated by prevention measures. The Building Code Effectiveness Grading Schedule of the 

Insurance Services Office, Inc., a subsidiary of Verisk Analytics, assesses the building codes 

in effect in a particular community as well as how the community enforces its building codes. 

Many insurers use the grading for underwriting and to issue premium credits related to 

buildings constructed under certain levels of building codes. In addition, in June 2022, the 

White House and FEMA announced the National Initiative to Advance Building Codes 

(NIABC) as a whole-of-government approach to support community resilience through the 

adoption of modern building codes.21 The MitFLG Implementation Team for the NIABC 

created a new interagency Building Codes Task Force, which, among other things, continued 

the Federal Landscape Analysis process to collect data from federal agencies on gaps and 

opportunities that may impact the adoption, administration, or enforcement of modern building 

codes and oversaw the creation of agency building codes implementation plans. 

Examples of European public-private initiatives included Ireland’s government funded 

programme, Major Flood Relief Schemes, as well as France’s public-private natural disaster 

compensation scheme, a financing mechanism for natural catastrophe prevention measures 

(Fonds Barnier), and new legislation on crop insurance. In addition, Spain has a public 

insurance entity to cover extraordinary risks (Consorcio the Compensación de Seguros) and a 

Pool for Environmental Risks. Belgium’s disaster funds (Fonds de Calamités) and regional 

initiatives aim to raise awareness on risk of drought and prevention measures. 

Finally, assessing the availability and take-up of coverage is part of pre-disaster risk mitigation. 

EIOPA highlighted the risk of increasing exclusions of coverage, product complexity and 

unclear policy wording, raising the attention for product oversight and governance. Therefore, 

20 See, EIOPA, EIOPA and ECB call for increased uptake of climate catastrophe insurance (24 April 2023), 

https://www.eiopa.europa.eu/eiopa-and-ecb-call-increased-uptake-climate-catastrophe-insurance-2023-04-

24_en. 

21 MitFLG 2022 Year in Review, 2.
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EIOPA issued a supervisory statement on exclusions22 and is conducting studies related to 

exclusions from insurance for natural catastrophes, identifying risks to affordability and 

availability (protection gaps), as well as expectation gaps from policyholders on the extent of 

coverage.

D. Supervisory approaches to natural catastrophe (nat cat) models and (open 

source) access to data and models.

The rise of nat cat risks is an important impetus for improving the modelling of these risks and 

integrating mitigation factors into the models. Workstream members noted that forwardlooking approaches in models can complement the traditional modelling approaches. However, 

access to relevant data is an important challenge to measuring and modelling nat cat risks, and 

there is a need for geospatial data on exposures, as well as data on insured and economic losses. 

The availability of nat cat models and data is an important element to limit/reduce protection 

gaps. 

Workstream members shared a common understanding that supervisors can contribute to 

improving risk assessment (including through the collection and sharing of data) and risk 

awareness (e.g., through training) by bringing together supervisors, public entities and 

modelers. Supervisors can promote model development for nascent risks, access to open-source 

data or models as well as set standards, building on expertise from nat cat modelers, among 

others. For example, EIOPA has built an interface for an open-source modelling tool to support

stakeholders in modelling catastrophe risks.23 Workstream members agreed to share further 

information on their respective data collection initiatives and templates for collecting/sharing 

information on natural catastrophe modelling. 

The NAIC presented on its Catastrophe Modeling Center of Excellence (CoE). The purpose of 

the CoE is to provide state insurance supervisors with the necessary technical expertise, tools, 

and information to effectively regulate their markets. Impetus for the creation of the CoE, 

among others, is the fact that nat cat models are used by the industry for capital reserve 

calculations, underwriting and ratemaking and therefore, supervisors should have resources 

and training about how they are developed. The lack of commercial models for the increasing 

risk of wildfire contributed to the need to enhance wildfire model development and improve 

the collection of loss data. In addition to nat cat risk, the scope of the CoE’s activities also 

include man-made risks like cyber risk and terrorism risk. 

Embedded in policy and research activities, the CoE is assisting states to use catastrophe model 

outputs to assess their risk from natural hazards and understand how that may impact their 

insurance markets. The CoE is collecting model documentation to be shared in a confidential 

and secure manner with supervisors and creating executive summaries on the various models. 

The CoE is also developing training on catastrophe models and will offer courses to 

supervisors. The CoE brings together modellers, supervisors and researchers, such as the 

Insurance Institute for Building and Home Safety (IBHS), which benefits the discussion on the 

development of models, and the integration of mitigation measures in the models. Finally, 

resilience is also part of the initiatives supported by the CoE. The CoE will provide support to 

22 EIOPA, Supervisory statement on exclusions related to risks arising from systemic events (22 September 

2022), https://www.eiopa.europa.eu/publications/supervisory-statement-exclusions-insurance-products-relatedrisks-arising-systemic-events_en. 

23 The application is publicly available on EIOPA’s website: Open-source tools for the modelling and 

management of climate change risks (europa.eu)
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the states to work with community partners to address health impacts of disasters, for example 

funding medical devices for underserved community members to continue functioning after 

disasters or addressing mold and health degradation after flooding events. Further, the CoE will 

undertake additional consumer outreach events in 2023 allowing supervisors to share resources 

and experiences.

EIOPA’s initiatives on nat cat modelling include initiating the first of a series of regular 

reassessments of the nat cat standard formula model, with the support of EIOPA’s Cat Risk 

Expert Network, composed of (re)insurers, modelers, and brokers. EIOPAs Internal Model 

Unit has been collecting data on nat cat models which it is currently reviewing. Workstream 

members discussed the backward nature of models and the importance of forward-looking 

reviews. Workstream members also discussed whether the reassessment of the standard 

formula can reflect a forward-looking view. Certain models start developing forward-looking 

projections. 

EIOPA publishes its nat cat insurance protection gap dashboard,

24 which assesses the 

protection gaps across the EU Member States; only one fourth of losses caused by natural 

catastrophes that are part of the dashboard, are insured today. Conclusions as to whether the 

gap is widening, need to be assessed cautiously at the EU Member State level. The impact of 

public-private partnerships is not always reflected in the EU Member States’ insured loss data, 

and the picture may also be different across regions or communities. Access to relevant and 

comparable data remains a constant challenge.

The absence of commercial models for certain risks, such as for wildfire, prompted EIOPA to 

start looking at open-source model initiatives. EIOPA is engaging with academics to support 

access to open-source data via a practical user interface to allow supervisors and stakeholders 

to improve their risk assessment. The value of the data is increasing, as is its usefulness for 

various purposes. EIOPA’s aim is to improve the access to data on insured loss data for risk 

assessment more generally (e.g., for the purpose of buying property or community 

developments). 

III.Conclusion and Next Steps

EU and US workstream members agree that the insurance industry as well as insurance 

regulatory and supervisory initiatives are well positioned to contribute to reducing losses from 

climate change. This can be achieved by increasing risk awareness and risk prevention, 

supporting the take-up of insurance, but also through improved modelling and sharing of 

information across public and private entities to improve risk assessments of (emerging) perils. 

Going forward, exchanges on approaches and practical examples for promoting climate 

resilience through regulatory and supervisory measures can be deepened. 

The purpose and operational approach for such deepened involvement could be to aim for 

establishing good regulatory or supervisory practices, based on deep dive case studies. This 

would involve sharing more in-depth knowledge and information, based on practical expert 

cooperation, on a selected number of areas, to potentially support common approaches where 

appropriate to address global risks, especially where products are sold world-wide and global 

reinsurance coverage applies. As losses to properties and businesses arising from natural 

24 EIOPA, Dashboard on insurance protection gap for natural catastrophes, https://www.eiopa.europa.eu/toolsand-data/dashboard-insurance-protection-gap-natural-catastrophes_en. 
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catastrophes are growing due to climate change, reinsurance capacity is also under pressure. 

Going forward, to assess the resilience of the insurance industry and society to climate-related 

events, reinsurance natural catastrophe capacity should also be addressed.

Based on the discussions held so far, focusing on the role of insurers as risk managers for 

society, and based on the depth of the discussion during 2022, two selected areas for a further 

deep dive starting in 2023 could be:

• Underwriting to promote climate resilience. Understand prudential or conduct

supervisory and regulatory measures to support the integration of prevention measures 

through product design and product oversight. Include analysis on issues relating to 

availability of reinsurance coverage. Discuss regulatory and industry-based good 

practices. 

• Catastrophe risk modelling and access to data. Discuss good practices for 

improving transparency, knowledge on natural catastrophes and understanding of 

natural catastrophe models by insurance supervisors. Discuss good practices of opensource data collection initiatives and natural catastrophe modelling for selected perils. 

EU and US workstream members agreed to share further information on their 

respective data collection initiatives and templates for collecting and sharing 

information on natural catastrophe modelling.