The private markets would have the first layer of responsibility, while the National Catastrophe Insurance Organizations would represent the second layer. This layer would in turn be supported by the European Group of National Catastrophe Organizations (EUROCAT), a new organization operating under the auspices of the European Commission. An approach that utilizes a pan-European reinsurance program is proven to be the most efficient solution for minimizing the total cost of catastrophe risks in the European Union. EUROCAT would provide reinsurance to the state or regional funds, while securing financing through the issuance of CAT Bonds. Member- state funds would be required to adopt adequate disaster response and management mechanisms and enforce reasonable building code, land use, and mitigation efforts to minimize the amount of insured losses. As the reinsurance premiums charged by EUROCAT would be risk based, the pricing mechanism must be used to encourage active development and enforcement of these standards.
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Associate Professor of Insurance, Department of Statistics and Insurance,
University of Piraeus, Greece