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The Hungarian National Bank was not as bold with the base rate today as weeks ago

The Hungarian National Bank was not as bold with the base rate today as weeks ago

March 24, 2026
SIM cards & mobile internet in Hungary: Best prepaid options for tourists

SIM cards & mobile internet in Hungary: Best prepaid options for tourists

March 24, 2026
First hybrid geothermal power plant to be built in Hungary

First hybrid geothermal power plant to be built in Hungary

March 24, 2026
Economy Minister Makes Case for Stimulus

Economy Minister Makes Case for Stimulus

March 24, 2026
Debrecen police arrested a man for vandalism and assault in Debrecen

Debrecen police arrested a man for vandalism and assault in Debrecen

March 24, 2026
Debrecen in 2026: A City of Festivals – Rich Cultural and Culinary Experiences Await Visitors Through Late Summer

Debrecen in 2026: A City of Festivals – Rich Cultural and Culinary Experiences Await Visitors Through Late Summer

March 24, 2026

Physical Climate Risks and the Role of Insurance in Bank Risk Management Patrick Montagner, ECB Supervisory Board member, discusses in Eurofi Magazine the growing significance of physical climate risks for banks and the role of insurance in mitigating these risks. Key points include: Climate Risks Are Increasingly Material: Banks face significant financial impacts from climate-related risks, particularly physical risks from extreme weather and other environmental events. Supervisory guidance from the ECB (2020) and the European Banking Authority emphasizes that these risks must be integrated into governance, strategy, and risk management. Gaps in Current Risk Management: Supervisory reviews reveal that banks’ approaches to physical risks are less mature than for transition risks. Shortcomings include insufficient granularity in identifying exposures, limited forward-looking hazard assessments, and incomplete integration of physical risks into credit decisions and pricing. ECB stress tests and Pillar 3 disclosures confirm that physical risks already affect bank portfolios, and around 90% of banks consider themselves materially exposed. Insurance as a Mitigation Tool: Insurance is important, particularly for real estate collateral, but it is not a complete solution. Only a fraction of climate-related losses are insured, and coverage varies widely across countries and risk types. Annual contract renewals and long-term loan maturities create structural gaps, limiting banks’ visibility of coverage over the life of a loan. Reliance on government support following disasters may also be increasingly constrained as climate impacts intensify. Enhanced Risk Management Practices: Banks are complementing insurance with broader physical risk strategies, including centralised systems combining geolocation data, collateral information, risk assessments, and insurance coverage. Location-specific indicators, mitigation measures like flood protection, and ongoing borrower engagement are increasingly integrated into risk frameworks to improve assessment of vulnerabilities. Ongoing Challenges and Outlook: Despite improvements, current models may still underestimate risks, particularly compound or tipping-point events, while climate impacts are accelerating. ECB Banking Supervision plans to continue analysing and addressing physical climate risks as part of its 2026–28 priorities. Overall, while insurance helps mitigate some losses, robust, forward-looking physical risk management remains essential for banks to safeguard financial stability in the face of accelerating climate hazards.

  • March 24, 2026

Patrick Montagner, ECB Supervisory Board member, discusses in Eurofi Magazine the growing significance of...

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