D3.10 Preliminary Design of the New Insurance Instrument

The PIISA (Piloting Innovative Insurance Solutions for Adaptation) project is a three-year initiative involving 12 partners from five EU countries, including research institutions, meteorological agencies, and insurance experts. It focuses on co-developing climate-resilient insurance portfolios and data-sharing solutions for climate risk and losses. The project is organized in several pilot projects, including one in Central Portugal, which aims to develop and test new insurance models for forests against wildfires, which is the focus of this project report. Wildfires are a growing threat across Europe, causing significant economic and ecological damage. Portugal, one of the most wildfire-prone regions in Europe, faces increased fire risks due to climate change (Galizia, et al., 2021). In response to this, public authorities, including the Agency for Integrated Rural Fire Management (AGIF), have initiated efforts to mitigate such risks. AXA Climate, in partnership with AGIF, is piloting a project under the PIISA project, funded by Horizon Europe, to develop innovative wildfire insurance solutions that incentivize adaptation measures at both the household and forest management levels. This pilot project, centered in Central Portugal, aims to address the increasing wildfire risks in the country by co-developing and implementing new insurance models. These models are designed to encourage and financially support the adoption of wildfire adaptation measures, such as constructing firebreaks in high-risk areas. The Central Portugal pilot project is organized into three iterative loops, each focusing on different aspects of insurance development and risk mitigation. The first loop involves defining the study area, collecting and harmonizing data relating to the studied region (vegetation, topography, weather, fire history), and mapping current wildfire risks. The second loop will involve the design and testing of insurance instruments tailored to both households and forest managers, incorporating mitigation measures into pricing structures. The final loop will explore the replicability of these solutions in other European regions. The pilot’s first loop, running from December 2023 to June 2024, focused on co-designing plans and activities with partners and stakeholders, followed by the co-development of localized knowledge related to wildfire risks, adaptation measures and insurance products, which were iteratively refined based on stakeholder feedback. This report outlines the methodology employed, shares preliminary results from Loop 1, and presents the next steps in the project’s development. This pilot project, as a part of the overall PIISA project, is paving the way for innovative insurance solutions that can play a crucial role in safeguarding Europe’s forests, promoting sustainable forest management, and enhancing climate resilience.