Insurers in the European Union have acknowledged the risk to biodiversity but continue to struggle with quantifying its financial impact, according to a new report.

The European Insurance and Occupational Pensions Authority (EIOPA) has recently released a report emphasising the need for insurance companies to incorporate biodiversity loss into their risk assessments. The report, published on July 3, 2025, highlights the growing recognition of biodiversity loss as a significant emerging risk within the industry.

According to the report, current assessments remain largely qualitative, with biodiversity loss being primarily considered from a reputational point of view. However, EIOPA believes that this perspective needs to evolve, and the industry needs to start quantifying the financial impact of biodiversity loss.

In November, EIOPA recommended that fossil fuel stocks and bonds held on insurers' balance sheets receive additional prudential treatment due to their connection with biodiversity loss. This recommendation underscores EIOPA's commitment to encouraging the insurance industry to take a more proactive approach towards addressing biodiversity risks.

EIOPA's earlier research found that around 30% of insurers' direct corporate bond and equity exposures rely on at least one ecosystem, particularly water resources. This finding underscores the interplay between biodiversity and climate risks, a connection that EIOPA wants to help the industry better understand.

Approximately one in five insurance companies mention biodiversity in their risk and solvency assessment. While this is a step in the right direction, EIOPA observes that there is room for improvement. To facilitate this, EIOPA aims to promote capacity building through a structured dialogue between supervisors and industry representatives.

The report also notes promising practices in the insurance industry that reveal a growing awareness of the potential implications of biodiversity loss. However, the available search results do not specifically mention any European insurance companies developing models and scenarios for biodiversity risk management to measure and control these risks.

EIOPA plans to engage with insurers to develop models and scenarios for managing biodiversity risk. By doing so, EIOPA hopes to equip the industry with the tools necessary to fully understand and address the risks associated with biodiversity loss.

Financial regulators have been putting more focus on the links between nature loss and risks to people, the economy, and the environment. As the insurance industry continues to grapple with these issues, EIOPA's report serves as a crucial guide, emphasising the need for action and providing a roadmap for the future.

Insurers in the European Union have acknowledged the risk to biodiversity but continue to struggle with quantifying its financial impact, according to a new report.