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Climate, making cybercrime risk more insurable: Dutch Central Bank

Regulator Nederland Bank (DNB) said the insurance industry needs to make relatively new risks more insurable. For example, increased flood risk due to climate change remains difficult to guarantee. Maarten Gelderman, director of supervision at the DNB, said the government could also help by making this clearer.

Many businesses and homes are now completely uninsured against floods. Compensation for damage caused by infiltration of groundwater due to heavy rain, etc. But if that rainfall occurs tens of kilometers away and the excess water is carried by the river and causes damage, it may not be covered by insurance.

“In the case of the Limburg floods last summer, the government intervened and was very lenient,” Geldermann said. “But at the same time, the government has shown that this is a one-off.” If potential customers become aware of the importance of insurance, more demand will be created and the market will be able to develop further.

According to DNB, the problem is no different with cybercrime. Openness is often lost when businesses and individuals fall victim to this. This makes it difficult to grasp the extent of the problem and may not properly assess the need for insurance.

The situation is also difficult for insurers, as they struggle to estimate the risks and possible costs for each case. In this case, Gelderman believes public registries will help insurers refine their models.

DNB also said new technology could put pressure on solidarity in the insurance industry. Among other things, the use of large amounts of data and artificial intelligence could enable insurers to categorize risks almost on a per-insured basis. This could result in people no longer having insurance.

The role of foreign insurers in the Dutch market is also increasing. According to DNB, that has its upsides, but it also comes with risks. Larger parties can guarantee that certain risks are insurable, whereas Dutch-only insurers cannot. On the other hand, however, foreign insurers do not always have specific knowledge of Dutch conditions, laws and regulations.

DNB also recognizes the risk of foreign parties using the market to offer only favorable insurance policies. This could mean that Dutch insurers will have to take on a larger share of less profitable policies and may therefore face a tougher time.

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