EIOPA notes positive early steps by insurers in addressing biodiversity risk but calls for stronger collaboration in key areas

The European Insurance and Occupational Pensions Authority (EIOPA) published today a report exploring to what extent and with what tools (re)insurers in Europe are already identifying, measuring and managing biodiversity risks. Despite the challenges in assessing biodiversity risks due to their complexity and their interconnectedness with other environmental risk factors, EIOPA’s report notes promising market practices among (re)insurers. At the same time, it points to areas where further engagement will be essential to strengthen the industry’s ability to respond to biodiversity-related risks going forward. Biodiversity loss – understood as a reduction in the variety of all living and non-living elements that make up the natural world – is a multidimensional risk with significant macroeconomic implications that could undermine the stability of the financial system. Biodiversity-related risks are closely intertwined with climate-related risks (the so-called ‘climate-biodiversity nexus’), and the two can reinforce one another, particularly in the case of natural catastrophes. This close interconnection complicates both the identification of biodiversity risks and the assessment of their impact on economic activity. Biodiversity is inextricably linked to the state of nature and there is broad consensus that nature provides a continuous flow of benefits to people — including materials such as food and water, processes such a pollination or climate regulation or recreational...