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New developments in natural catastrophe (Nat Cat) insurance regulation in Europe

Over the past few years, Europe has experienced a significant increase in natural catastrophe (Nat Cat) losses, driven by extreme weather events such as floods, storms, and wildfires.

02/06/2025 · 5 minute read

Over the past few years, Europe has experienced a significant increase in natural catastrophe (Nat Cat) losses, driven by extreme weather events such as floods, storms, and wildfires.

The 2021 floods in Germany and Belgium, which resulted in over €40 billion in damages, highlighted the vulnerability of infrastructure and communities to climate-related disasters. In 2022 and 2023, heatwaves and droughts further exacerbated the situation, leading to agricultural losses and increased pressure on water resources.

More recently, in the autumn of 2024, we saw huge floods in Italy and Poland, and particularly severe flooding in Valencia, which triggered Spain’s extraordinary risk insurance scheme, the state-owned Consorcio de Compensación de Seguros (Insurance Compensation Consortium). 

In response to these escalating risks, European regulators and insurance bodies have begun to emphasize the need for enhanced natural catastrophe insurance requirements.

There have been calls for more comprehensive coverage options and the integration of climate risk assessments into insurance underwriting processes. The aim is to ensure that both individuals and businesses are better protected against the financial impacts of future natural disasters, while promoting resilience in the face of a changing climate.

In response to this, European country regulators have responded by implementing their own amendments or, in some cases, newly mandatory requirements in respect of insurance against major natural catastrophe events. Below is a summary of recent developments in insurance regulatory requirements:

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Natural catastrophe contribution rates have been increased with effect from January 1, 2025, following amendments to the insurance code, which now also includes damage resulting from the consequences of drought-soil rehydration. In addition to specifying the rates or contributions, the insurance code also clearly identifies which insurance contracts are subject to these premiums.

New mandatory natural catastrophe insurance requirements are in place from the following dates, according to the size of the company. The new regulation outlines clear deductibles and limits for the natural catastrophe coverage required.

  • March 31, 2025: Large enterprises defined as businesses that exceed at least two of the following three criteria:
    a) a total balance sheet of €25 million.
    b) net revenues of €50 million.
    c) employee numbers above 250.
  • October 1, 2025: Medium enterprises.
  • January 1, 2026: Micro and small enterprises.

Should a company decide to self-insure, instead of transferring the risk of natural catastrophe exposure, it will be ineligible to apply for public contributions and financial aid in general, including those that result from Nat Cat damages.

With effect from June 1, 2025, a new mandatory natural catastrophe insurance requirement will be implemented for businesses with annual turnovers exceeding €500,000, to protect against forest wildfires, floods, and earthquakes. As the criteria for the application of the new requirements are not fully defined at the time of writing, we expect further clarification from the Greek regulator in the coming months.

The natural catastrophe pool is managed by the Consorcio de Compensación de Seguros (Insurance Compensation Consortium), a government entity that provides coverage for extraordinary risks, such as terrorism, flood, earthquake, and other Nat Cat risks. While this is not a new requirement, the Valencia claims in 2024 have triggered the pool. Additionally, the magnitude of the losses has prompted more scrutiny on how companies are insuring their assets. As a reminder, the Consorcio premium must be paid in full within the first 30 days after renewal; failing that, no Nat Cat coverage is provided until the premium has been paid.

An increased premium tariff on earthquake and volcanic eruption insurance took effect from 2024.

In response to the recent surge in natural catastrophes across Europe, the EU has also taken proactive measures to enhance disaster preparedness and resilience. This includes prioritizing the development of a comprehensive climate adaptation strategy, which encompasses increased funding for infrastructure improvements, disaster response mechanisms, and community resilience initiatives.

Additionally, the EU actively encourages the development of insurance products specifically designed to cover natural catastrophes, with several member states implementing targeted schemes to provide affordable insurance for properties at heightened risk. Furthermore, the EU fosters public-private partnerships, promoting collaboration between public authorities and private insurers to enhance coverage for natural disaster risks. These initiatives aim to create a more robust framework for managing the financial impacts of natural disasters and enhancing overall preparedness for future events.

While there are other existing mandatory natural catastrophe insurance requirements across Europe, the ones highlighted above have been implemented in the past few months.

 

For more information, please contact your Marsh advisor.

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Praveen Sharma

Global Leader, Multinational Insurance Regulatory and Tax Consulting Practice

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Diana Accordi

Multinational Advisory Practice Leader, Marsh Europe

  • Spain

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