Public Affairs | Climate Resilience | Insurance

The European Commission’s new Climate Insurance Alliance begins with a simple admission: when extreme-weather losses are not insured, they do not disappear. They migrate—to households, companies, banks, municipalities and, ultimately, the public balance sheet.

By Frank Farnel | Responsible Public Affairs | September 17, 2026

Executive Summary

• On September 16, 2026, European Commission President Ursula von der Leyen announced that the Commission would establish a Climate Insurance Alliance. The announcement is politically significant, but it is not yet a legislative proposal, funding program or insurance product.
• Europe’s protection gap is structural. EIOPA’s updated dashboard estimates that only about one quarter of natural-catastrophe losses between 1980 and 2024 were insured. A separate 2025 Eurobarometer cited by EIOPA found that only 17% of respondents held cover for natural-catastrophe property damage.
• Insurance is therefore becoming part of climate infrastructure. Its design affects where people can live, where firms can invest, whether banks can lend, how municipalities recover and how much disaster risk eventually reaches taxpayers.
• France, the United Kingdom, Italy and California show four different models: broad solidarity backed by the state; a temporary cross-subsidy with an exit date; mandatory purchase with significant peril gaps; and a rapidly expanding insurer of last resort under financial pressure.
• The central public-affairs question is no longer whether government will be involved. It is how risk, cost, prevention and accountability will be divided before the next disaster makes those choices by default.

The Loss Always Finds a Balance Sheet

Insurance is easy to treat as a technical market between customers, brokers, carriers and reinsurers. Climate change has made that description incomplete. When a house cannot be insured, a mortgage may become harder to obtain. When a factory’s catastrophe policy excludes the peril that actually closes it, the loss reaches employees, suppliers and lenders. When a municipality cannot afford coverage, recovery competes with schools, transport and public health. When private capacity withdraws, governments become insurers of last resort even if no statute gave them that title.

That is the context for the Climate Insurance Alliance announced by European Commission President Ursula von der Leyen in her State of the Union address on September 16, 2026. The accompanying letter of intent lists the alliance alongside a European Heatwave Plan and a European Water Initiative.

The verified facts are still limited. The Commission intends to bring together insurers, investors, risk modelers, public authorities and insurance buyers. According to reporting published immediately after the speech, the alliance will explore ways to increase coverage and promote instruments such as group insurance and parametric insurance. The Commission had not, at the research cut-off, published its membership, governance, timetable, legal basis, budget or criteria for success.

That distinction matters. An alliance can create common data, develop products and align political attention. It can also become a forum in which every participant supports “resilience” while waiting for someone else to absorb the least attractive risks. The value of the initiative will depend on whether it changes the allocation of risk—not merely the vocabulary around it.

Uninsured loss is not eliminated risk. It is risk reassigned without an explicit decision about who is able—or expected—to carry it.

The scale of the reassignment is considerable. EIOPA’s 2025 protection-gap dashboard, which covers 30 European countries, concludes that only around a quarter of natural-catastrophe losses from 1980 to 2024 were insured. The aggregate figure conceals sharp differences by country and peril. Italy and Greece have the highest combined current gap scores in the dashboard; earthquake losses in Italy and flood losses in Italy and Germany account for a large share of Europe’s historical uninsured losses. Windstorm is comparatively well covered. Flood, wildfire, coastal flood and earthquake produce more uneven outcomes.

Protection is not simply a supply problem. In March 2026, EIOPA reported that its 2025 Eurobarometer found only 17% of respondents held insurance against natural-catastrophe damage to property. Households may underestimate risk, misunderstand coverage, assume the state will compensate them, or decide that premiums are unaffordable. Insurers, meanwhile, must price increasing hazards without making the product so expensive that healthy risk pooling collapses.

Public affairs enters precisely here. The argument is not confined to actuarial models. It concerns solidarity between low- and high-risk areas; the conditions attached to public guarantees; building rules; land-use decisions; access to loss data; consumer comprehension; the treatment of vulnerable households; and the political acceptability of premiums that reveal risks previously hidden by average pricing.

The Five Choices Behind Every Climate-Insurance Regime

Every protection-gap system makes five choices, whether legislators acknowledge them or not. Together they form a practical framework for assessing the Commission’s alliance and the national models it may seek to connect.

1. Peril: What exactly is covered?

A policy can be mandatory and still fail if its definition of flood, storm, wildfire or business interruption does not match the event that causes the loss. Protection should be evaluated against real exposure, not the presence of a policy document.

2. Population: Who is inside the pool?

Broad participation spreads cost, but compulsion raises questions of affordability and fairness. Voluntary systems preserve choice, yet can attract mainly the highest risks. A narrow safety net can become structurally concentrated if the private market sends increasingly risky properties into it.

3. Price: Who pays before the event?

Flat surcharges express solidarity. Risk-reflective premiums communicate danger and reward mitigation, but can make coverage unaffordable in places where households cannot relocate. Public subsidy can protect access, but may also conceal the cost of continuing to build in exposed areas.

4. Prevention: What changes because insurance exists?

A regime that finances reconstruction without reducing vulnerability can institutionalize repeated loss. Deductible relief, resilient repair, building standards, hazard mapping and land-use controls determine whether insurance is merely a payment mechanism or part of adaptation policy.

5. Payer of last resort: Who carries the tail?

Private insurers can absorb frequent and modeled losses within capital limits. Reinsurers diversify larger events. National backstops and EU-level mechanisms may address exceptionally severe or correlated shocks. The political question is the trigger: when does risk move from an owner to an insurer, from an insurer to a pool, and from the pool to the state?

The five choices interact. Cheap universal coverage without prevention can expand public liabilities. Pure risk pricing without affordability support can produce insurance deserts. Mandatory purchase without clear peril definitions can create the appearance of protection while leaving the decisive loss uninsured.

France: Solidarity Buys Coverage, but Not Immunity

France offers one of Europe’s clearest public-private models. Natural-catastrophe cover is attached to eligible property policies, insurers handle claims, Caisse Centrale de Réassurance provides state-backed reinsurance, and a nationally determined surcharge supports the system. According to CCR, the model has enabled approximately 97% of people in France to be covered against natural catastrophes, with an indicative annual household cost of around €40 in 2025.

The strength is broad mutualization. A homeowner does not have to predict and buy a separate contract for every covered catastrophe. Insurers retain a role, while the state guarantee supports capacity for extreme events. The arrangement also avoids a rapid division between places that private models consider attractive and places they abandon.

The system is not costless or static. The Cat Nat surcharge on property premiums increased on January 1, 2025. In its February 2026 report to the French economy minister, CCR said the increase was intended to rebuild reserves over a decade and restrict use of the state guarantee to exceptional events. The same report warned that higher claims, tighter insurance and reinsurance markets, and more frequent and dispersed events were testing the regime’s balance.

France has therefore moved beyond the question of compensation to the question of continued insurability. The third National Climate Adaptation Plan created an observatory to identify territories showing signs of stress in insurance supply. CCR’s modeling with Météo-France estimates that insured natural-catastrophe losses could rise substantially by 2050, with the outcome depending on both climate hazards and the evolution of exposed assets.

What is established: France has achieved unusually broad coverage through compulsory attachment, national pooling and a state-backed reinsurer.

Analysis: The political durability of the model will depend on whether visible prevention accompanies higher contributions. Solidarity is easier to defend when contributors can see that public authorities are reducing avoidable exposure, improving building resilience and resisting development that creates tomorrow’s claims.

The United Kingdom: A Subsidy With an Expiration Date

Flood Re addresses a narrower problem. Created by legislation and funded through an industry levy, it allows insurers to transfer the flood component of eligible household policies to a pool at capped premiums linked to council-tax bands. Its purpose is to keep flood insurance available and affordable for homes at high risk while the market moves toward risk-reflective pricing.

The unusual feature is the end date. Flood Re is required to leave the market in 2039. Its transition indicators track the conditions that must improve if coverage is to remain widely available after the scheme disappears. The model therefore forces a question that permanent backstops can postpone: what must change in the physical risk, market and public policy so that subsidy is no longer necessary?

Flood Re has tried to connect claims with adaptation through “Build Back Better,” which can fund up to £10,000 of resilience measures in eligible claims. Those measures may include flood-resistant doors, raised electrical sockets and non-return valves. The principle is important: recovery should reduce the cost of the next event rather than simply restore the asset to its previous vulnerability.

The difficulty is scale and time. A household benefits only after eligibility is established and a claim occurs. Property-level measures cannot replace catchment management, drainage investment, planning control or public infrastructure. Nor does an exit date itself create the conditions for exit. Flood Re states plainly that it will cease to operate in 2039 regardless of conditions.

What is established: the scheme combines temporary cross-subsidy, capped reinsurance pricing and a statutory transition objective.

Analysis: Flood Re is strongest as a policy discipline. It treats affordability support as a bridge to lower risk, not a substitute for it. Its test will come later: whether governments, insurers and property owners make enough progress for 2039 to be a real transition rather than a delayed political crisis.

Italy: Mandatory Insurance Can Still Miss the Event

Italy chose compulsion for businesses. The 2024 legislation and the implementing decree of January 30, 2025 created an obligation for non-agricultural firms to insure certain assets against specified catastrophic risks. EIOPA’s 2025 dashboard describes a public-private structure in which private insurers provide primary coverage and the state-controlled reinsurer SACE may reinsure part of claims with a government guarantee.

That is a major change in a country with one of Europe’s widest historical protection gaps. It expands the risk pool and reduces the expectation that post-disaster public aid will always substitute for pre-event insurance.

Cyclone Harry exposed the difference between mandatory purchase and effective protection. According to Reuters reporting from Sicily in July 2026, the January storm caused more than €1 billion in coastal damage. Businesses discovered that standard mandatory policies covered earthquakes, river floods and landslides, but not necessarily cyclones, storm surges, rough seas or business interruption. Some insured firms received little or nothing from their policies for the loss they had actually suffered.

Italy’s insurance supervisor has recognized the credibility problem. If buyers are told they must obtain catastrophe insurance but the politically salient disaster falls outside the standard contract, trust declines. Low trust then depresses voluntary purchase of additional riders, weakens pooling and makes future mandates harder to defend.

What is established: Italy’s mandate covers defined perils and assets; it is not comprehensive climate-loss insurance. Coverage rose, but important exclusions remained.

Analysis: public communication must describe the boundary of the mandate as clearly as the mandate itself. A high compliance rate is a poor success measure if the insured peril set does not match regional exposure. The relevant metric is the share of modeled loss that would be paid—not the number of policies issued.

California: The Safety Net Can Become the Market

California’s FAIR Plan is an insurer of last resort for property owners unable to obtain basic fire coverage from the voluntary market. It is not a government agency; licensed property insurers participate in the pool. Its public purpose is nonetheless unmistakable: preserve minimum access when ordinary market capacity is unavailable.

The model becomes stressed when “last resort” ceases to be marginal. Private insurers restricted new business or withdrew from high-risk areas as wildfire losses and rebuilding costs rose. More owners moved into the FAIR Plan, increasing the concentration of the very risks the voluntary market was seeking to avoid.

The January 2025 Los Angeles fires turned concentration into a financing event. The FAIR Plan announced on February 11, 2025 that it would access additional funds to pay claims. California’s insurance commissioner approved a $1 billion assessment on member insurers—the first such assessment in more than three decades. At the time, the Plan had received nearly 4,800 claims from the Palisades and Eaton fires and had paid more than $914 million, according to Reuters.

The dispute then moved from insurance mechanics to public legitimacy. Under California’s stabilization arrangements, insurers could recover a portion of an assessment through a temporary charge on policyholders. Consumer advocates challenged the arrangement; regulators argued that a viable market required a predictable way to fund the backstop and retain private carriers.

What is established: a concentrated last-resort pool needed an extraordinary assessment after a major event, spreading part of the cost across the broader insurance system.

Analysis: a residual market is sustainable only if it remains residual or is capitalized as the larger social instrument it has become. Calling a growing pool “temporary” does not diversify its risk. California shows how an insurance-access problem can become a statewide political argument about rates, models, consumer protection, mitigation and who pays for accumulated underpricing.

Four Models, Four Political Bargains

Model	Who enters the pool?	How cost is shared	Principal strength	Principal vulnerability
France: Cat Nat	Broad attachment to eligible property insurance	National surcharge, insurers, CCR reinsurance and state guarantee	Very high reach and territorial solidarity	Rising claims can outpace contributions and prevention
United Kingdom: Flood Re	Eligible high-flood-risk households	Industry levy and capped transfer premiums	Affordability support linked to a transition objective	Statutory 2039 exit may arrive before risk is sufficiently reduced
Italy: Nat-Cat mandate	Non-agricultural businesses, phased by size	Mandatory private cover with public reinsurance support	Expands the insured population and reduces reliance on ad hoc aid	Named-peril boundaries can leave the actual event uncovered
California: FAIR Plan	Owners unable to find basic cover in the voluntary market	Premiums, reinsurance and assessments on member insurers, with possible consumer surcharges	Maintains minimum access when private capacity retreats	Adverse concentration: the safety net accumulates high-risk properties

What the Climate Insurance Alliance Must Resolve

The Commission is not starting from a blank page. In December 2024, the ECB and EIOPA published Towards a European System for Natural Catastrophe Risk Management. The paper proposed two complementary pillars: an EU public-private reinsurance mechanism funded by risk-based premiums, and an EU public disaster-financing fund to help rebuild infrastructure, conditional on agreed risk-reduction measures.

The new alliance should not be confused with the adoption of those proposals. It may develop them, choose different instruments or remain focused on voluntary market innovation. But the earlier paper identifies the questions that stakeholders will now contest.

First, additionality. EU action should add capacity for risks that national and private arrangements cannot efficiently diversify. If it simply subsidizes existing losses, it may weaken incentives to price and reduce risk.

Second, conditionality. A public backstop without credible mitigation conditions socializes preventable loss. Yet conditions that are too rigid can withhold support from precisely the municipalities and households least able to finance adaptation.

Third, data governance. Insurers need granular exposure and loss data. Public authorities need to understand market withdrawals and affordability. Property owners need usable risk information without seeing their homes rendered unfinanceable overnight by a model they cannot challenge.

Fourth, distribution. Group insurance and parametric products can lower transaction costs and accelerate payment. Parametric insurance also creates basis risk: the trigger may fail to match the policyholder’s actual loss, or may pay when physical damage is limited. Product innovation does not remove the need for clear consumer explanation.

Fifth, representation. Insurers, reinsurers and modelers possess essential technical knowledge. They also have commercial interests. Municipalities, consumer organizations, banks, small businesses and vulnerable households need meaningful roles in a process that will influence premiums, property values and public spending.

The public-affairs failure to avoid is a coalition built around the abstract goal of “closing the gap” while participants disagree silently about which gap. Insurers may focus on capital and insurability; governments on fiscal exposure; households on affordability; banks on collateral values; municipalities on development and tax revenue. The alliance will need a common outcome measure that shows who is better protected, against which peril, at what cost and with what reduction in underlying risk.

What Leaders Should Do Now

1. Map exposure beyond the insurance policy. Boards should identify physical damage, business interruption, supply-chain dependence, employee displacement, infrastructure failure and financing covenants. A policy schedule is not a resilience assessment.
2. Test definitions against the local hazard. Confirm whether flood includes surface water and storm surge, whether wildfire smoke is covered, and whether loss of access or utilities triggers business-interruption protection.
3. Separate affordability from underpricing. If a premium is socially unaffordable, the answer may be transparent, targeted support. Hiding the risk price across the whole system can delay prevention and produce a larger correction later.
4. Bring mitigation evidence into policy discussions. Public-affairs teams should be able to show what a company, sector or territory has done to reduce expected loss—not merely why it wants public capacity.
5. Engage the full risk chain. Insurance ministries do not own planning rules, drainage, building codes, emergency response or financial supervision. Effective engagement crosses portfolios and levels of government.
6. Prepare for disclosure conflict. Better hazard information can protect buyers and improve investment, but it can also affect property values and lending. Leaders should support transparent methodology, appeal routes and proportionate transition arrangements.
7. Define the public ask precisely. Reinsurance capacity, premium support, prevention finance, post-disaster liquidity and infrastructure reconstruction are different interventions. Treating them as one request obscures who benefits and what behavior should change.

Hypothesis: insurance availability may become a more immediate constraint on territorial development than many formal climate regulations. If financing depends on cover, and cover depends on credible adaptation, insurance will influence investment location even before legislators prohibit development in high-risk zones. This is an analytical judgment, not an established forecast.

Conclusion: The Alliance Is About Government, Even If It Is Voluntary

The Climate Insurance Alliance arrives at the right moment. Europe needs a forum capable of connecting risk models, private capital, public guarantees, consumer behavior and physical adaptation. The Commission is also right that national budgets cannot continue to absorb uninsured losses as if each disaster were an unforeseeable exception.

But the gap will not close through insurance uptake alone. A badly designed mandate can cover the wrong peril. A safety net can accumulate the risk abandoned by the market. A national pool can remain solvent while exposed buildings continue to multiply. A parametric product can pay quickly and still leave part of the real loss untouched.

The serious work begins when stakeholders state the bargain plainly. Who must insure? Which losses count? What prevention is required? How much solidarity is legitimate? When does the state enter, and what changes in return?

Climate risk will answer those questions brutally if policymakers do not answer them deliberately. Insurance is therefore no longer adjacent to climate policy. It is one of the institutions through which climate policy becomes visible—in a household premium, a bank’s lending decision, a company’s investment plan and the public money required after the storm.

Key Evidence

• The European Commission announced the creation of a Climate Insurance Alliance on September 16, 2026; detailed governance, funding and product design had not yet been published at the research cut-off. Source: European Commission.
• Only around one quarter of European natural-catastrophe losses from 1980 to 2024 were insured. Source: EIOPA 2025 dashboard update.
• EIOPA’s 2025 Eurobarometer found that 17% of respondents held coverage for property damage caused by natural catastrophes. Source: EIOPA.
• CCR reports that France’s public-private model enables approximately 97% of people in France to be insured against natural catastrophes. Source: CCR.
• Italy’s Cyclone Harry caused more than €1 billion in coastal damage, while some firms holding mandatory catastrophe policies found that cyclone and storm-surge losses were outside standard cover. Source: Reuters, July 23, 2026.
• California approved a $1 billion assessment on insurers after the 2025 Los Angeles fires strained the FAIR Plan. Source: Reuters, February 12, 2025.

Glossary

Basis riskThe possibility that a parametric insurance trigger does not match the policyholder’s actual loss.Insurance protection gapThe difference between total economic losses and the portion covered by insurance.Insurer of last resortA mechanism that offers limited coverage when the ordinary market will not provide it.Parametric insuranceInsurance that pays when a predefined measurement—such as rainfall, wind speed or temperature—crosses an agreed threshold, rather than after a traditional loss-adjustment process.Public-private reinsuranceA system in which private insurers transfer part of catastrophe risk to a pooled or state-supported reinsurer.Risk-reflective pricingPremium setting intended to correspond to the expected cost of the specific risk being insured.Tail riskA low-frequency but very severe loss that can exceed ordinary insurance or public-budget capacity.

References and Further Reading

European Union and Supervisory Sources

1. European Commission. 2026 State of the Union Address by President von der Leyen. September 16, 2026.
2. European Commission. State of the Union 2026: Letter of Intent. September 16, 2026.
3. European Insurance and Occupational Pensions Authority. Dashboard on Insurance Protection Gap for Natural Catastrophes. 2025 update.
4. European Insurance and Occupational Pensions Authority. Climate Insurance Protection Gaps: A Demand-Side Challenge. March 25, 2026.
5. European Insurance and Occupational Pensions Authority and European Central Bank. Towards a European System for Natural Catastrophe Risk Management. December 18, 2024.
6. European Environment Agency. European Climate Risk Assessment. 2024.

National Schemes and Case Material

7. Caisse Centrale de Réassurance. Rapport au Ministre de l’Économie, des Finances et de la Souveraineté industrielle et numérique. February 2026.
8. Caisse Centrale de Réassurance. Faire face au changement climatique : quelle résilience ?. 2025.
9. Flood Re. Annual Report 2025: Transition. 2025.
10. Flood Re. Our Call to Action: Transition Plan. 2023.
11. Italian Ministry of Enterprises and Made in Italy. Decreto interministeriale 30 gennaio 2025, n. 18—Obbligo assicurativo per le imprese contro i danni catastrofali. January 30, 2025.
12. California FAIR Plan Association. California FAIR Plan Takes Steps to Access Funds to Pay LA Fire Disaster Claims. February 11, 2025.

Authoritative Reporting Consulted

13. Kate Abnett. EU to Launch Climate Insurance Scheme After Summer of Extreme Weather. Reuters, September 16, 2026.
14. Giuseppe Fonte and Alvise Armellini. Sicily’s Cyclone Harry Tests Italian Mandatory Insurance Plan. Reuters, July 23, 2026.
15. Kanjyik Ghosh. California Seeks $1 Billion From Insurers to Shore Up FAIR Plan After LA Fires. Reuters, February 12, 2025.

Source and Methodology Note

Research was completed on September 17, 2026. The article prioritizes the European Commission, EIOPA, the ECB, national authorities and the official operators of the schemes discussed. The Climate Insurance Alliance was announced one day before the research cut-off. No detailed Commission proposal, governance document, budget or implementation timetable was publicly available; descriptions of possible instruments are therefore attributed to the Commission speech and contemporaneous reporting, not presented as enacted policy. Cross-country comparisons require caution because schemes cover different populations, assets and perils. The EIOPA dashboard combines modeled current risk with historical loss and insurance data and states that historical insured-loss data remain incomplete. The Italian and California case narratives use official program material supplemented by Reuters reporting. Passages labeled “Analysis” or “Hypothesis,” and the five-choice framework, are the author’s interpretation.

Suggested Internal Links

• Issues Management: Monitoring, Adaptation and Learning
• Coalition Building: From Shared Purpose to Durable Action
• Advocacy: Purpose, Representation and Evidence
• Responsible Public Affairs: Ethics, Trust and Public Decision-Making

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