Italy's Low Disaster Insurance Coverage Highlighted on International Day for Disaster Risk Reduction

A Critical Protection Gap in Italy

On the occasion of the International Day for Disaster Risk Reduction, held annually on October 13, a critical vulnerability in Italy's preparedness for natural catastrophes was brought to light: the nation's exceptionally low insurance coverage against catastrophic and seismic risks. Reports indicate that a mere 6% of homes in Italy are covered by such policies, leaving a vast majority of properties exposed to the financial devastation caused by events like earthquakes, floods, and landslides.

The International Day for Disaster Risk Reduction, established by the United Nations General Assembly, aims to foster a global culture of risk awareness and reduction. The theme for 2025, 'Fund Resilience, Not Disasters,' underscores the urgent need for increased funding and risk-informed investments in disaster risk reduction. This focus resonates particularly strongly in Italy, a country frequently impacted by natural hazards.

The Stark Reality of Underinsurance

The figures surrounding Italy's residential disaster insurance paint a concerning picture. According to the Association of the National Insurers (ANIA), approximately 5.9% of all Italian houses possess an earthquake or flood policy. Other estimates, such as those from Dr. Francesco Blasi, commercial director at RC Polizza, place the adequately covered percentage at around 5% of homes. This places Italy among European Union members with the lowest penetration rates, often below 10%.

The consequences of this underinsurance are severe. For instance, following the devastating floods in Emilia in May 2023, which caused an estimated €9 billion in losses, only a fraction—5.5%—was insured. Furthermore, data from the European Insurance and Occupational Pensions Authority (EIOPA) reveals that an astonishing 98% of total economic losses from earthquakes in Italy between 1980 and 2021 were uninsured. This substantial 'protection gap' is estimated to result in over €4 billion in non-insured damages annually, forcing affected populations to rely heavily on potentially slow or unavailable government support for reconstruction.

Factors Contributing to the Low Coverage

Several interconnected factors contribute to Italy's persistent insurance gap:

• State Dependency: A prevalent expectation exists that the Italian State will intervene and cover damages after a natural catastrophe, reducing the perceived need for private insurance.
• Poor Insurance Culture: There is a general lack of a robust insurance culture among the populace, with many homeowners not actively seeking or understanding the benefits of such policies.
• Complexity and Cost: Insurers face challenges in accurately assessing and pricing risks due to the variable frequency and intensity of natural disasters. For homeowners, high premium costs, limited coverage options, and significant deductibles can make policies seem prohibitive.
• Market Limitations: Italy lacks a domestic reinsurer, which can impact the capacity and affordability of catastrophe insurance in the market.

Broader Efforts and Future Outlook

While residential coverage remains critically low, the Italian government has taken significant steps to address the broader issue of disaster risk financing, particularly for businesses. Under the 2024 Budget Law (Law No. 213 of December 30, 2023), mandatory disaster insurance for businesses has been introduced. This mandate requires companies to secure coverage against floods, earthquakes, and landslides, with implementation phased through March 31, 2025, for large enterprises, October 1, 2025, for medium-sized enterprises, and January 1, 2026, for small and micro enterprises.

This initiative aims to bolster business protection, enhance economic resilience, and alleviate the financial burden on the state. The state-controlled agency SACE will provide reinsurance coverage of up to 50% of damages, backed by a €5 billion fund. Insurers are now obligated to offer these policies, facing fines for non-compliance. While this mandate currently excludes residential properties, it signals a growing recognition within Italy of the urgent need to strengthen financial resilience against natural disasters, potentially paving the way for future considerations regarding residential insurance.