Disaster risk How the new compulsory insurance against natural disasters works Italy is among the countries most affected by earthquakes and climate changes but least protected. More than 6 million policies will need to be issued by law in just 8 months. There are those who describe this as a new property tax and believe that government intervention to compensate for damages can no longer be the only viable option. But so far the government has been late and insurance companies have been left in chaos

Climate change, overbuilding and poor maintenance of land have a huge impact on the damage caused by natural disasters, and even in Italy companies are now required to insure against damage caused by earthquakes, floods, landslides and floods.

The memory of the catastrophic floods that occurred in Emilia Romagna in May 2023 is as vivid as the memory of last summer’s extraordinary storms that hit Northern Italy with high winds and severe hailstorms, damaging buildings, cars, land and infrastructure.

Immediate State intervention to compensate for damages cannot be the only way to manage risk and there is a need for a more effective system developed before a catastrophic event occurs. This is basically the logic of compulsory disaster insurance.

This obligation was introduced by the latest budget law and for now only concerns companies based in Italy and operating permanently on Italian territory, although they are established abroad; However, it cannot be ignored that this innovation will also be valid in the future. It relates to residential properties. And what seems obvious in this case is this: Will the compulsory policy be perceived as a new tax on the home?

If until now it was the state that compensated citizens and businesses for damages caused by natural disasters (the annual cost of which was covered by approximately 3.5 billion public finances), with the new insurance obligation, a new paradigm centered on social security was created. Participation of private individuals (insurance companies) in covering damages due to catastrophic events, which are becoming more and more frequent in our country.

Damages caused by catastrophic natural events are increasing

The total loss due to devastating natural events in Europe in 2023 reaches 75 billion Euros. According to a report by international reinsurer Munich Re, only 17 billion of them were insured.

Italy is particularly affected by this scenario, especially considering the configuration of our lands that are exposed to various disasters such as earthquakes, floods, floods and volcanic eruptions. 378 extreme weather events (22 percent increase over 2022), 16 billion euros in damage and 31 deaths in affected areas. In summary, these are the figures describing the situation in our country by looking at Legambiente’s “Città Clima” observatory data.

As the Ania report (National Association of Insurance Companies) reminds, more than 70% of Italy’s territory is exposed to seismic and hydrogeological risk, and more than 40 floods and many significant seismic events have occurred in our country since 2009.

Such events are increasing due to climate change and human-caused land mismanagement (deforestation, overbuilding, haphazard settlements).

The chart developed by Eiopa (European Insurance Authority) relates the level of risk to the amount of goods covered. The situation in Italy (in the red area, top right) is very clear: a very high level of risk accompanied by one of the lowest insurance coverages, between 0% and 25%.

Until now, the Italian system has relied on the state providing economic aid. A subsequent response of an emergency nature, whose effectiveness is questionable for Italians affected by disasters. “Ten months after the flood in Emilia Romagna, not a single euro reached the pockets of citizens,” the Faenza citizens’ committee recalled in a letter.

An alternative method of intervention consists instead in relying on an insurance system that can guarantee exact compensation for damages to damaged property owners and a certain speed in receiving the necessary economic resources; This is something the State often cannot guarantee.

Issues: A new property tax?

Those who defend this compulsory policy system argue that contribution by the State is very burdensome in terms of public finances and requires costs that are difficult to bear.

The current system of aid “from above” implies that economic resources are found “through general taxation or through the implementation of one-off measures, thus through the contribution of all citizens.” Paradoxically, they do not have their own home,” we read in the White Paper prepared by Cineas (a consortium specializing in issues related to “risk culture”).

However, on the other hand, insurance liability brings with it important critical problems. First of all, it’s a matter of timing: The deadline for stipulating these policies has been set as December 31, 2024. This means that up to 6 million policies must be stipulated within 8 months; this is the number of companies that appear to require policies. be subject to liability with relevant sales, listings and subscription campaigns.

A result that seems impossible in such a short time, even in the eyes of insurance industry experts.

There is also the issue of businesses who will find themselves facing greater costs, and the possible reluctance of citizens if the law is extended to residential properties: in fact, there are those who argue that compulsory insurance would effectively sanction a new property. tax.

At this point, the attitude of Fabrizio Premuti, president of Konsumer (the association for the defense of consumer and user rights), heard by Today.it, is clear, for years supporting the usefulness of a system based on mandatory policies. “From a psychological perspective, insurance is perceived as a tax on a collective level. This is a problem that arises when we talk about compulsory insurance. There are also those who see motor insurance as a tax, but imagine what would happen if this coverage was not compulsory anymore.”

According to Premuti, the current system “is uncivilized and the State can no longer cope with it. The State system is a partial intervention that leaves the regions affected by the earthquake in Central Italy and the floods in Romagna facing disaster.” “Imagine that 40 thousand people are still homeless in the regions hit by the earthquake.”

Let’s talk about costs

“It is not the State that has to insure the assets of private individuals. Firstly, because it does not know how to do this; secondly, compensation is paid by general taxation, that is, with the taxes of those who have nothing, those who own real estate; thirdly, because the duty of the State is to prevent and take care of public assets”, he continues. says Konsumer president.

For this reason, “It is necessary to intervene in a different way. There are more than 30 million private residences in Italy and the reconstruction value of this figure is around 3 billion 900 billion euros. It is clear that a change of pace is needed in compensation policies.” France, Spain, Belgium, United Kingdom, America “System of insurance coverage in favor of private real estate operating alongside the State, as in many countries of Europe and the world, such as the United States”.

So how much does home insurance against disaster risk cost us? “We are talking about 100 euros per year for every 100 thousand of the value of the property,” explains Premuti. The value that refers to the reconstruction value of the house, not its commercial value. Therefore, “the cost of a policy on a house in Rome’s Piazza di Spagna, for example, would not be far off from the cost of a house in a suburban neighborhood.” An expense that is “absolutely sustainable” because “you can even include the insurance premium in the mortgage for an expense of just a few euros a month”.

Actually, we need to raise awareness about this issue. “Objective information is needed. We need to understand that the catastrophic situation posed by the risk of disaster – the risk of being deprived of any property, of not being able to return to one’s home, of seeing the population of one’s own land diminish – is nothing compared to spending up to several hundred euros a year”.

But as written now, the law risks having little effect. “Primarily, this concerns only businesses, but it would be urgent to extend the obligation to residential properties, as requested in a bill put forward by Ms. Michela Rostan in 2019.” He also continues, “Implementing decrees are needed and I doubt they will be written anytime soon. At the moment, insurance companies do not know how to package insurance products.”

Compulsory insurance: fines and exemptions

Agricultural enterprises and businesses whose real estate assets are burdened due to abuse or constructed without obtaining the necessary permits will be excluded from insurance liability.

Heavy fines of between 100 thousand and 500 thousand euros will be imposed on companies that do not comply with the obligation. Additionally, non-implementation of the policy will be taken into account when allocating contributions, subsidies or public benefits.