 Good morning everyone and thanks so much for joining us today here in the room in sunny Frankfurt and also for the people joining online My name is Irene Himsgerg. I'm heading the climate change center at ECB And I have the pleasure of opening this session and moderating the first part of the whole workshop today Where we will be discussing the insurance protection gap and the policy options to also reduce it and solve it Last week the World Meteorological Organization sent out a warning message That we will likely already breach the 1.5 degrees in the next five years So before 2027 on a temporary basis and with an increased frequency Also the last couple of days we witnessed the heavy rain, catastrophic floods and landslides in Italy It's the worst flood in Italy in 100 years and it leaves thousands of people homeless This also comes a bit later with the question who's gonna pay for the damage that will occur there And how can we solve it and what part of that is insured? So the topic that we are discussing today is just so topical and therefore I'm really pleased that we have a Very good lineup of speakers today with us To discuss this important topic and to also learn from each other and think about solutions How can we solve this insurance protection gap? Before we start please be aware that the event will be recorded and the recording will be shared at the ECB and IOPA websites Now let me move to the program Our first speaker today, and I'm really pleased to welcome him is the vice president of the ECB, Mr. de Gindes They're vice president a warm welcome to you and thank you so much for being here today and Opening providing the opening remarks for these workshops. Well, thank you very much He then good morning to everyone. It's a pleasure to be here today open this workshop and You know be dedicated today to the insurance in GAAP Well, as you know climate change is increasingly threatening our economy and financial system Combating that threat involves first foremost Swift and ambitious mitigation policies to reduce emissions and sustain the transition to a net zero economy The ECB is determined to play its part and contribute within our mandate as we have set out in our climate agenda But meeting the challenge of climate change also requires us to confront the risks from climate-related catastrophes that already exist and that are expected to intensify in the near future So it gives me great pleasure to welcome you to this joint ECB IOPA workshop Our two institutions have maintained an excellent collaboration on the climate insurance protection gap for several years Our joint research has already demonstrated how insurance mitigates the macroeconomic and welfare effects of catastrophes How climate change and insurance coverage interact And we recently published a joint discussion paper Setting out a range of policy options to tackle the climate insurance protection gap, which is the focus of this workshop That focus is timely given the macroeconomic impact of recent extreme weather and climate events devastating floods hit northern Italy as Irene has indicated last week and hit parts of Europe in the summer of 2021 the continent-wide drought last year was the worst for 500 years It heavily affected agricultural production Constraint transport and on several major rivers and reduced hydroelectric power generation by nearly a fifth exacerbating the energy crisis Insurance undoubtedly plays a valuable macroeconomic and societal role following catastrophes Payouts from insurers reduce uncertainty and support investment for the construction accelerating the recovery Insurance schemes also incentivize policy holders to reduce risks and enact adaptation measures As climate change causes catastrophic to become more frequent and more severe the value of insurance to society clearly increases Yet the European Union has a substantial insurance protection gap Only a quarter of the losses caused by extreme weather and climate-related events are currently insured and In several countries this share is below 5% Moreover, the climate change is expected to cause this protection gap to widen Lower coverage Good further increase the burden on governments both in terms of macroeconomic risks and fiscal spending to cover and ensure Damages potentially posing risks for that sustainability A widening insurance protection gap may also pose risk for financial stability Physical damage to uninsured assets can reduce collateral values and lead to reprisal of loans and securities for exposed financial institutions Catastrophes can also disrupt supply chains exacerbating the impact on the real economy and on financial institutions balance sheets This affects can lower credit provision a high rate of in high risk areas As will be elaborated further in the opening session the policy options set out in the discussion paper focus on fostering insurance coverage on a range of levels insurers should design their policies to encourage households and firms to reduce risk For example by granting discounts for implementing effective mitigation for adaptation measures Greater use of of catastrophe bonds could support the overall supply of insurance By passing on part of the risk to capital market investors in the same vein Governments could set up public private partnerships and backstops to probably cover the costs that insurance may incur from major disasters Existing EU examples of such partnerships include the consortium de compensación de seguros in Spain and the case central de reassurance in France Finally an EU wide public scheme could complement national level insurance schemes The EU scheme would help ensure sufficient funds are made available to European countries for reconstruction following rarer but larger catastrophes These policy options complement wider financial sector policy initiatives Regarding the banking sector a lack of insurance may prevent some property qualifying as collateral Potentially triggering higher capital needs and weighing on credit supply Targeted macro potential regulations may therefore be needed to enhance the resilience of banks against a persistent protection gap Accelerating the EU's capital markets union and sustainable finance agendas can help mobilize private funding to reduce the climate insurance protection gap Deeper more liquid and more integrated EU capital markets can enlarge the universe of investors in green projects and financial products including catastrophe bonds The aim of our joint discussion paper is to solicit feedback and promote debate on the principles framework and possible policy action set out Today's workshop provides a further forum to exchange ideas I would like to thank the diverse range of excellent panellists and participants who are joining us today We look forward to hearing from your contributions and maintaining an ongoing Dialogue as we pursue further work on this very important topic. Thank you very much for your attention Thank you so much The ginders furnace excellent opening remarks and setting the scene and emphasizing the urgency as well and the impact on financial stability Also on the economy at large and also what we can already maybe think of solutions of solving this And also emphasizing the excellent collaboration we had on this work together with IOPA and this bridge brings me to introducing the next Speaker of today that is chairperson Petra Hickman from IOPA. She will be bringing the insight from IOPA Petra, please the floor is yours Thank you. Thank you Reine and thank you vice president the ginders Thank you to all the ECB colleagues for a warm welcome For hosting this joint ECB IOPA workshop on policy options to reduce the climate insurance protection gap and Thank you, of course to the team in ECB and IOPA that have been working on these policy options and the reports as well as this workshop For a while if I think an interesting result that we really need to discuss It was a pleasure to collaborate Because by working together we can improve an overall understanding of the climate insurance protection gap as well as promote policy options For a more sustainable and resilient future We believe that only discussing and exchanging views with a broad group of stakeholders will help So that includes not only supervisors in central bankers, but also industry, NGOs and academia And that's where you come all in and we hope to identify solutions together to Solutions that are sustainable that are fair But that are also Implementable because I think we really need to also be able to to not just talk but act and it's therefore Heartening to see that so many of you are joining these events both in person as well as online and it is my pleasure to be here with you this morning Now some general words on climate change a lot has been said It's it's a global challenge posing material risks to society and the economy and to this transition That we need to do but we need to do it and we need to do it urgently the consequences of climate change are becoming more and more transparent and Unfortunately, and though I like to give concrete examples when I talk Unfortunately, I am able to every time I talk about this topic give a new example Already the reason flooding in Italy was mentioned But only in the last two weeks I visited Spain really early very hot spring and therefore drought is a concern and After that, of course the weather system that caused trouble in Italy first went over Croatia also there Resulting in tremendous flooding and so in this regard when it comes to these damages and I mean comes to these these Developments that are just happening as we speak I open ECB share a common mission prevention and mitigation of systemic risk and preservation of financial stability I open ECB have therefore been working together on a range of topics including stress testing Climate change is a particular example of a cross-sectoral risks where cooperation between our institutions is essential and our ongoing work on for example, nature related risks Draws from expertise and data on both institutions Moreover, we will also work together closely to respond to the request from the European Commission Join D with the other two ASAS as my new BA as well as the ESRB to do a cross-sectoral analysis Assessing the financial systems resilience to stress in the transition to the EU's 2030 goals for the reduction of greenhouse gas emissions Moreover at the OPA we have the ambition To have we have a very ambitious sustainable finance strategy And we've always underlined the vital world and insurance companies will play and will have to play in a green transition and mitigating the economic impact of climate change First of all, they're important long-term investors And so they can support the transition to a more sustained one resilient economy through their investments through stewardship But second and here insurance within the financial industry is more unique They are also the risk managers of society and So they are called upon to support consumers to console to support firms to support governments against losses that follow from extreme weather events through their underwriting and This includes also raising awareness in incentivizing climate-related risk prevention and adaptation as well as by swiftly providing the necessary funds when there is an impact However, thirdly, we should not forget that also insurance itself will be impacted by transition risk And by the increase in the risk that we also all see And so therefore I hope also considers it essential to understand the potential impact of climate change on the sector itself And in recent years we have monitored both transition and physical risk and Published several studies on this that you can find on our website aiming to identify material exposures and assessing potential impact on the insurance sector Now when it comes to assess Really impact on on our society. Let's talk about this protection gap And but for giving the importance of the insurance sector It is essential that this sector also continues to offer financial protection against the consequences of net cat risks What we now see the number was already mentioned But let's say it again only one fourth So only 25 percent of net cat losses is insured and that shows a significant protection gap that is already existing Insurability affordability of climate-related risk is becoming a critical concern for insurers for society for policy makers And if no countermeasures are taken it is expected to widen We therefore need to address the insurance protection gap by proposing not only but also finding and implementing solutions And this is an important part of our financial and sustainable finance strategy IOPA's work aims at contributing first of all in improving the risk assessment Risk prevention and adaptation measures then can follow and in this context We have developed a dashboard of insurance protection gaps That is focused on identifying the key drivers and improving risk awareness This dashboard is available on our website and per member stage You can see there had the four major net cat risks and what size they have per member stage Thinking about flooding, drought, earthquakes, etc Moreover, we feel that the access to data and models is essential to do our work But also for industry to do it's work for society to know what they're dealing with And to build prevention measures We therefore believe that open-source data and models on climate-related risk are crucial to improve the transparency and accuracy of climate risk assessment for industry and the supervisory community And to highlight this importance IOPA has developed and released last week the Klimada app to facilitate the use of an open-source catastrophe model A framework that was developed by the University in Surich And then enhanced by IOPA to make it user-friendly and brought to you in an app And again you can find this on our website We're also using that tool ourselves and we will include some results of that tool in our next financial statement Financial stability report Besides clean knowledge of the risks and the gaps and dealing with those through adaptation through mitigation We cannot deny that there will be damages in the future that somehow need to be dealt with And therefore we need to take measures So the measures first of all is looking really at the whole industry and at the whole system It's first of all a supply side question What can we do focusing on pricing and product design? How can we incentivize preventative measures? How can also the knowledge of being risk managers inform decisions on where to build on how to address drought already even before we start building? Second there is the demand side Why do people and businesses not take insurance? What do they need to be able to take insurance? And how can we ensure that that is going to be done more than we see it currently in order to also ensure that the private market is taking its role? And then there is the macro part What can be done at the macro part? How can we increase the capacity of the insurance industry to deal with this risk? But also how can we strengthen society's resilience through public private measures? And this is what we discussed today in the paper And I think Vice President Deguindos clearly listed what steps we are proposing And I think these are very needed steps, sensible steps that make the whole letter of policy options complete So let me conclude Building on this work we will continue to work closely with the ECB colleagues And identify policy options to enhance the insurance of European households And companies against climate related catastrophes While also creating further incentives to actually mitigate to reduce the damages Whereas I would say that even if we really reduce and by mitigation We probably will see an increasing number of claims Moreover, I hope that this is the start of a further discussion And broader discussion on how at an EU level We can also find ways to deal with the risks when they are becoming systemic And when they are also too much for only an insurance sector to deal with So I thank everyone who worked on this report I very much thank the panelists who will speak today I look forward to the discussion But I also very much see it as only a start for more work is to be done Thank you very much Thank you so much, Petra Iopa, thanks so much Vice President Indus for your excellent opening remarks And setting the scene for this workshop we are having today And I think Petra you really set out nicely the role of insurance in the whole spectrum of insurance protection gap Also the cooperation of the ECB and Iopa together On the stress testing on this specific project on nature related risk And also I think how we complement each other's work So what the work that ECB is doing on financial stability fund with stress testing In our own operations of the supervisory side on our macroeconomic models And if I have one message for everyone today I think we all have to pick up our piece of the puzzle for fixing this And working together finding solutions This is I think the key message and discuss what we can do there at that front So with that I want to thank both of you so much for being here And wishing you a very nice day and happy there to invite the next panelists Thank you very much