The magnitude 6.2 earthquake that jolted central Italy earlier this week is the latest tragedy to hit Europe, but initial forecasts show that insurance companies may not bear the brunt of the disaster’s impact.
The tremor recorded before dawn on August 24 caused more than US$1 billion in economic losses, based on early estimates from hazard-analysis company Kinetic Analysis Corp., Bloomberg
Reinsurers may be affected if the insured losses overtake those of a similar deadly earthquake that also devastated Central Italy in 2009, the report said.
Some risk modelling agencies have released their initial forecast on the quake’s impact on the industry, agreeing that insured losses may be limited due to the relatively low insurance penetration.
AIR Worldwide said Italy’s nonlife insurance market is the eighth largest in the world and the fifth biggest in Europe.
However, earthquake coverage is often not included in standard homeowners’ policies and is typically issued as an extension of fire policies. For industrial and commercial structures, earthquake coverage may be offered for an additional premium, which varied by region.
“Due to low take-up rates, insured losses are estimated to be less than 2% of the total economic loss due to earthquakes in Italy,” AIR Worldwide said.
Meanwhile, Impact Forecasting said the insured losses in the projected US$1 billion economic cost will be “much lower.” The firm explained that historical events have shown a “significant discrepancy” in the economic-to-insured loss ratio.
In the aftermath of the 2009 temblor, Italian insurance giant Generali
reported a €130 million rise in claims, while German rival Allianz
saw claims increase by €84 million, according to a report by News.Markets.
“The reason the loss then was not bigger is many houses in Italy are not insured,” Michael Huttner, an insurance analyst at JPMorgan Cazenove, was quoted as saying in the report.
Huttner said the main worry for insurers would be losses from small and medium enterprises with business interruption cover. However, the figures are also expected to be lower.
“August is the main holiday month in Italy, when businesses are often run at a reduced pace,” he said.
The recent Central Italy earthquake and at least 40 strong aftershocks flattened mountainous communities, destroying houses and buildings. Latest media reports said the tremor has so far killed 250 people who were buried in the rubble of collapsed structures.
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