ITALY: Preparing for a mandatory cat insurance solution for real estate properties?

Following the 2016 earthquake sequences, ANIA - the Italian insurers' association is working to a project on household insurance for catastrophic risks. According to ANIA's President, Marina Bianca FARINA, implementing a solution for a better management of the cat risks is a must for Italia and should provide for a public-private partnership.

"The solution could consist in a compulsory insurance for all homeowners, providing for affordable prices thanks to the mutuality between the different areas of the territory," FARINA said. The project takes into consideration the assumption that the insurance market could provide coverage for most of the earthquake risk, "providing for the state intervention to cover the eventual peaks exceeding the system's capacity".

Yet, the project is still in its infancy, needing a large consultation with the public organisms and other stakeholders, as well as aligning with the national projects of buildings' seismic strengthening and citizen's education with regard to the cat risks. A good start point may be the buildings that will be reconstructed in the aftermath of the 2016 earthquakes or those consolidated within the national "Casa Italia" plan, also taking into consideration insurance costs among the tax incentives that will be granted.

The idea of introducing a form of mandatory home insurance is not for the first time on the table, although quite unpopular. "Compulsory insurance is the fastest way to reach the largest number of insured - has stated Carlo Coletta, Country manager for SWISS Re after the October earthquake in Central Italy, quoted by the Italian press - and the higher the number of the insured, the better the distribution of risk, the lower the premium you pay." In short, pay all to buy for less, with the forms of incentive that could help spread the tool, says Swiss Re's manager: "For as by eliminating or drastically reducing the tax of 22.25 per cent levied on insurance policies against natural disasters. Among other things, given the low prevalence of these hedges, the impact on revenue would be almost nil. First of all, however, need effective information campaign, because if the insurance continues to be perceived as a cost, incentives affect up to a certain point. "

During the past years, several attempts of introducing a mandatory home insurance scheme failed, the projects promoted by the government being rejected by the Parliament. Yet, almost 70% of Italy's housing stock fall in earthquake prone zones and require property insurance, particularly for natural catastrophe cover. Italian building insurance does not cover earthquake damage, unless specifically required by the insured. Prices are high and procedures quite complicated, the high value buildings needing a professional risks assessment. Therefore, there is a heavy reliance on post-disaster government intervention. According to Swiss Re, commercial earthquake insurance penetration stood at 0.07% in 2014. Similarly, residential earthquake insurance penetration stood at 0.01%. This was due to the government intervention and support after any natural disaster.

Italy, with its complicated geological setting, has a long history of strong earthquakes across the country, and in this area, the central Apennine region, in particular. Important earthquakes were quite numerous in the country's history. In fact, according to Standard & Poor's, Italy is the second-most-earthquake-prone country in Europe, after Turkey. In addition, the country is prone to catastrophes such as flooding, landslides, earthquakes and tornados.

One of the latest major earthquakes in central Italy hit the town of L'Aquila in 2009, killing over 300 people and destroying a vast area of the "old city" within medieval walls. According MUNICH Re, the total loss amounted to as much as EUR 2.5 billion, of which EUR 260 million insured losses. Recent statistical data published by AON Benfield show that, despite being the 7th largest global cat event in 2016, with economic losses of about USD 5 billion and 299 deaths, the Amatrice earthquake of August 24th has seen only USD 100 million in insured losses, demonstrating once again the low insurance coverage of the Italian homes.

"According to the ANIA 2016 estimates, less than 1.0% of the homes in Italy have private earthquake coverage. Despite living in one of the most naturally disaster prone countries in Europe, Italians are persistently underinsured for disasters due to the lack of the payments and length of time involved in earthquake claim settlements. Instead of buying insurance, Italians prefer to simply avoid earthquake zones when purchasing property," reports the latest Timetric whitepaper - published January 2017 -, "Italy: The impact of economic challenges on the Italian insurance market."

Related articles


2017 is a revolutionary year for the Russian insurance market

2017 is an anniversary year. A hundred years after a series of key events in the history of our country and in one separate segment of the Russian economy such as insurance there will be also revolutionary events, after which the insurance market, apparently, will never be the same.


Travel Insurance compensation in case of a delay or cancellation? Sense or non-sense?

Whether it's buying the best airline ticket or finding the best travel insurance, people want an easy way to understand and compare products online. But, when it comes to submitting a (flight delay compensation) claim, people will find it difficult, time-consuming and complicated. Would a legally eligible claim need to be covered under a travel insurance policy or would a traveller seek to file a complaint to the airline carrier him-/herself? Would there be a strong support for travellers, who are eligibly entitled to compensation, with customer-friendly travel insurance benefits?


Swiss Re: Disasters resulting in economic losses, almost double the level in 2015

Total economic losses and global insured losses from natural catastrophes and man-made disasters in 2016 were the highest since 2012, reversing the downtrend of the previous four years, Swiss Re sigma says. Globally there were 327 disaster events in 2016, of which 191 were natural catastrophes and 136 were man-made. In total, the disasters resulted in economic losses of USD 175 billion, almost double the level in 2015. 


Global insurance industry: EUR 3.6 trillion in 2016, up 4.4% y-o-y

Initial projections by ALLIANZ Research suggest that total global premium income rose to a new record high of eur 3,650 billion last year (excluding health insurance). In a y-o-y comparison, the nominal increase - after adjustments to reflect foreign currency translation effects - comes to an estimated 4.4%.


Despite its complexities, insurers and companies can get to grips with cyber risk, Swiss Re sigma says

Cyber risk is a growing concern for businesses, with recent attacks demonstrating that the costs of a cyber breach can escalate well beyond managing the fallout of lost or corrupted data. Swiss Re's latest sigma report "Cyber: getting to grips with a complex risk", says businesses need to do much more to integrate cyber security into their risk management programmes. Initiatives to boost cyber resilience are underway.


ALLIANZ: New-age corporate leaders are facing new and higher risks

"Rapidly changing risks and increasing compliance requirements mean corporate leaders are under scrutiny over alleged wrongdoing as never before. There are a growing number of areas that can result in a company and its directors being sued," states the recently issued D&O Insurance Insights - Management liability today: What executives need to know report by ALLIANZ.




VIDEO: GIF 2017, LONDON: HRH The Prince of Wales welcome address

"Insurers have to play an important part not only in managing current risks, but also in modelling the future by contributing to a better understanding of risks, to closing the insurance gap and setting an example of responsible investment policy," HRH The Prince of Wales said in his welcome address at GIF 2017.


See all