ROMA – With the publication of the draft of the budget law we are once again talking about compulsory policies against catastrophic damage but only for companies which, according to the Government, will have to take them out by the end of 2024, on the one hand by promoting them with public incentives and with the introduction of Sace guarantees and on the other by punishing non-compliers with a fine of up to one million euros. But taking a look at the data relating to insurance coverage against extreme events in Italy, it is clear that the most urgent measures would be attributed to private homes rather than to businesses, which unlike the former already enjoy a good general coverage rate.
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Previous unsuccessful attempts
Tempers are already burning in the opposition, where the deputy of the Green and Left Alliance Angelo Bonelli defines it as “a gift to insurance companies, which reveals how this government avoids addressing policies to prevent the climate crisis.” The Meloni government, in reality, is attempting to introduce a measure that had been conceived in similar terms, but never introduced, by previous executives. In fact, for every tragedy linked to natural phenomena that occurs in Italy, there is a corresponding debate on the need to adopt insurance policies against extreme events, which could help prevent the great loss of time and resources already in the period immediately following the catastrophe. It had been discussed with Berlusconi in 2005 and 2007 with the proposal of voluntary insurance against the earthquake for private individuals and businesses and then also in 2012 with the government Monti, who raised the bar and proposed a bill to make it mandatory with the purchase of each new home. Finally, in 2019 the blue deputy Michela Rostan presented a proposal which once again provided for the stipulation obligation for anyone who owned a property, with the possibility of deducting the premium in the tax return. All attempts fell on deaf ears.
Even the current Minister of the Environment and Energy Security, Gilberto Pichetto Fratinhad mentioned it at the Insurance Summit 2022 in Ania (National Association of Insurance Companies), saying that “we should reflect on forms of insurance linked to the risks of natural disasters that minimize ‘ex ante’ public and private costs and the establishment of an ad hoc fund”. This happened last December and almost a year later the ministry has never reopened the issue.
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How much climate disasters cost us
Today, however, it is not only (so to speak) that Italians must defend themselves from seismic events. They have been happening for years with ever greater frequency – and vehemence – climatic episodes outside the ordinarythroughout the country. In the last year alone we have witnessed the gusts of wind and rain that have uncovered houses in Milan like jars, the floods in the Marche and Emilia Romagna, the fires that have not stopped burning in Sicily for days.
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The one that started out as aemergency is slowly becoming more and more systematic and the responses to its management and containment must be systematic and structural. Since the beginning of 2023 they have increased by 135% to the beginning of 2022. From January to May alone, 122 extreme events were recorded compared to 52 in the same months of 2022, certifies the Legambiente City Climate Observatory. The cost that Italy faced, between 2010 and 2020 alone it was 36.5 billion euros, according to Eurostat, which adds that there is a “clear trend” that expenses “are increasing by 2% per year in the last decade”. We therefore return to talking about policies against natural disasters.
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High risk, but little coverage for private homes
In Italy there is still no compulsory insurance against extreme climatic events despite regions such as Veneto, Lombardy and Emilia Romagna are among the ten European territories with the greater exposure to extreme weather events and climate change in 2050, according to the Global Domestic Climate Risk ranking. Over 80% of civilian homes – which in Italy number just over 35 million – are exposed to a medium-high level of risk. Furthermore, after Greece, we are the European country that records the widest insurance protection gap in terms of natural disasters, which is calculated as the difference between the amount of losses and that of the amounts covered by the policy, which in 2021 was estimated by Istat at 4.3 billion euros. In fact, in Italy just over 5% of private homes are insured against natural disasters such as earthquakes or floods, while 44% are covered by fire. This despite the fact that starting from 1 January 2018, taxpayers who open or renew this type of policy can take advantage of a deduction equal to 19% of the premium paid.
For businesses, size makes the difference
This gap does not only concern families, but also Italian companies. It is said that ours is the country of small or medium-sized enterprises, but it would be more correct to speak of an even smaller dimension, namely that of micro-enterprises: out of 4.5 million businesses, 95% have fewer than 10 employees, while large companies, those that employ more than 250 people, are one thousandth compared to the previous ones. According to data from Istat and the Bank of Italy, estimated by Ania, 7% of companies are insured in Italy. This data, however, does not return the high fragmentation linked to the size of the various companieswhich is directly proportional to the level of coverage: it goes from 55% of small companies (10-49 employees), through 67% of medium-sized companies (50-249), up to 78% for big companies. Micro-enterprises, whether individually or family-run, maintain the same percentage as private homes, i.e. a paltry 5%.
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How policies work
In Italy the policies that protect against climate disasters are, in most cases, additional guarantees to the insurance already taken out on your home, whether it is a house or a condominium. When you want to access financing for taking out a mortgage, it is mandatory to have explosion and fire coverage – which is not necessary on a second home or for those who live in rent. In addition to this, it is possible to add an accessory policy which provides additional protection from hail, wind and storms. UnipolSai offers one called the “Weather Events” policy, which was signed by 64% of customers, which include both individuals and businesses. The data relating to defense against earthquake damage, however, amount to only 13% and in the case of floods this drops further to 8%. “But the insurance trend is growing following the latest extreme climatic events”, they assure from UnipolSai.
As regards costs, however, the incidence of guarantees on the average policy premium amounts to between 15 and 20%but the data varies, obviously, depending on the type of home and its location and therefore the level of risk in the area. But what are the parameters for which they are activated? “Covered events that allow you to obtain compensation from this additional policy must have such violence that it can be found in many entities located nearby“, has explained Chiara Carli of UnipolSai, “and if this does not happen, the policy for ordinary maintenance of the property will be used”.
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Latest in Europe. Worse than America, but better than Asia
Together with several Eastern European countries and Lithuania, we are among the nations of our continent con minor natural damage coverage. France and Spain stand between 20 and 35% e Denmark and Holland even exceed 50%according to data updated to 2021 from the European Central Bank, which dedicated an entire report to the insurance coverage gap in the various countries of the Union.
Average share of economic losses caused by weather events protected by policy in Europe, 1980-2021 (ECB)
“Solo about a quarter of the losses due to climate disasters is currently insured in the EU. The costs of a disaster depend not only on the severity of the damage but also by the speed of reconstruction times”, we read in the ECB report. “Without insurance, families and businesses must finance the recovery mainly through savings, credits or state aid, with more unstable times and resources.” As regards the international situation, Verisk, an American company specialized in risk analysis and assessment, estimates that in North America 51% of losses are insuredWhile in Asia it is only 12%.
The financial shield for international protection
An attempt to standardize the situation was presented to the G7 last year. The Finance Minister of Ghana Ken Ofori-Attarepresenting the V20, the group of vulnerable countries, and Svenja SchulzeMinister for Cooperation and Development in the German government, proposed the adoption of the Global Shield against Climate Risks, a financial shield against climate damage. The official launch only took place last June, while its actual implementation will still have to wait.