ITALY: 10 years after the L'Aquila earthquake, measures to increase country's resilience to Nat Cat are undertaken
Although the measures have only led so far to a 2% increase of the take-up rate, which leaves Italy still in the group of countries with a very low Nat Cat insurance coverage, Swiss Re's analysts believe that "tax incentives are a longer-term mechanism to encourage greater uptake of insurance in the coming years, reduce the financial burden on government, and to foster understanding and the building of a culture of efficient disaster risk transfer in Italy."
Two are the main measures mentioned by the paper:
- a deduction on personal income and corporate income tax introduced in 2017, that can be claimed for all retrofitting actions that reduce the vulnerability of existing residential and industrial buildings to earthquakes in seismic zones 1, 2 or 3 (high to moderate hazard);
- an incentive meant to encourage uptake of catastrophe insurance - as of 1 January 2018, all-natural catastrophe policy purchases for residential houses have been exempt a 22.2% tax on associated insurance premiums. At the same time, purchasers can deduct 19% of the cost of premiums from their annual income tax.
According to Swiss Re's statistics, only between 2009 and 2017, the Italian Government has allocated over EUR 20 billion in reconstruction funds after the earthquakes of L'Aquila (2009) Emilia Romagna (2012) and the Central Italy (Amatrice & Norcia, 2016), while another about EUR 18.7 billion are to be spent until 2047 for finalizing the reconstruction works in these areas. Other sources, as the study released by Mediobanca Securities show that in the last century Italy has experienced every three years an over 5.5-magnitude earthquake, spending for recovery works, in total, over EUR 122 billion (current value) from the public budget only between 1968 and 2012. In average, during the last 44 years, Italy has lost every year about EUR 3 billion only because of earthquake events.
According to the ANIA estimates for 2016, less than 1.0% of the homes in Italy had a private earthquake coverage. During the past years, several attempts of introducing a mandatory home insurance scheme have failed, the projects promoted by the government being rejected by the Parliament. Yet, almost 70% of Italy's housing stock fall into earthquake prone zones and require property insurance, particularly for natural catastrophe cover. Moreover, much of the existing building stock consists in very old buildings, many of them built in the medieval era; even in the case of modern buildings, many were built either before any seismic provisions were in place (1974) or while insufficient standards were active (before 1996), making them non-compliant to the levels of modern antiseismic building standards.