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European insurer group stresses need for quality risk data


July 17, 2013   by Canadian Underwriter


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Insurance Europe, a federation representing insurance and reinsurance associations throughout the European Union, has released a position paper stressing the importance of access to risk data and pointing out potential pitfalls of compulsory disaster insurance.

European insurer group stresses importance of access to quality risk data

The position paper comes in response to an April report from the European Commission on insurance of natural and man-made disasters.

“Natural and man-made catastrophes are on the rise, while the capacity of the insurance sector to insure against them is not fully utilised,” the commission’s internal market and services commissioner Michel Barnier said at that time.

“European-level solutions to bridge the insurance gap need to be explored, along with common means of prevention and ways of raising awareness among citizens and companies.”

That “green paper” report was meant to encourage debate and public response and “assess whether or not action at EU level could be appropriate or warranted to improve the market for disaster insurance in the European Union,” according to the commission.

It was also meant to promote insurance as a disaster management tool.

In its response paper released Monday, Insurance Europe said it “strongly supports” the commission’s goals.

Overall, the group also said that “insurance needs to be tailored to the different types of risks and their locations, as there is no ‘one-size-fits-all’ solution to the insurance required for natural and man-made disasters in Europe.”

It also points out the distinction between natural and man-made disasters and that each requires its own kind of analysis.

“With respect to man-made disasters, a voluntary insurance market across Europe is the most suitable framework for accommodating the variety of liability needs posted by the level of safety standards and industrial operations of the various Member States,” the position paper says.

“Insurance Europe thus sees no need to harmonize financial security for this market at the EU level.”

The group also said it welcomes the recognition of the need for “free and ready access more sophisticated risk data.”

“Complete and accurate data on insurance penetration rates is not available for all Member States or, in cases where it is available, the data itself may still be imprecise,” the paper notes.

“Thus, this type of data does not serve as a reliable indicator of a successful or effective insurance market.”

In other words, areas that may have low market penetration for disaster insurance may not be accurately represented because of a lack of data, and because “…different perils and levels of severity can often lead to different types and amounts of available data.”

In terms of combining risks under one insurance contract, the position paper argues that this should remain a “free market option at the EU level,” or not mandatory.

It also points out potential negative consequences of compulsory insurance legislation, including “moral hazard – ie a lack of risk-mitigating behavior – that can be associated with compulsory insurance.”

The full position paper is available on the Insurance Europe website.


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