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Broadening the scope of risk sharing through a European backstop for natural catastrophes

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  • Bernhard Mayr

Abstract

An increased frequency and intensity of climate-related natural catastrophes has created significant challenges for both the private and the public sector. Existing risk-sharing approaches are reaching their efficacy limits, pushing governments to take on an increasing share of the burden as private-sector solutions become less affordable or available. This paper outlines how adding a European loan-based backstop facility to the risk-sharing hierarchy can contribute to a more efficient solution and why it may enhance private insurers’ risk-taking capacity. We elaborate on the mechanics of such an approach and show how it could increase private sector insurance capacity without additionally burdening the public.

Suggested Citation

  • Bernhard Mayr, 2024. "Broadening the scope of risk sharing through a European backstop for natural catastrophes," Discussion Papers 24, European Stability Mechanism, revised 27 Nov 2024.
    • Handle: RePEc:stm:dpaper:24
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    File URL: https://www.esm.europa.eu/system/files/document/2024-11/DP%2024%20Broadening%20the%20scope%20of%20risk%20sharing.pdf
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