The need to create a catastrophic risks insurance pool debated in Bulgaria

26 June 2014 — Olesea ADONEV
bulgaria4A 7 magnitude earthquake (on the Richter scale) in Sofia, Bulgaria, will most likely affect about 2 million people, according to Professor Emil BOTEV from the National Institute of Geophysics, Geodesy and Geography of Bulgaria. An estimate of the possible damage shows that about 39,000 buildings (from a total of 180,000 in the Bulgarian capital city) could be completely destroyed, while the total damage to infrastructure could amount to EUR 20 billion. Such an earthquake might kill over 4,500 people and cause significant injuries to another 20,000 people.

The above estimates were presented upon the International Conference entitled "Catastrophic risks in Bulgaria - the hierarchy of responsibility," which was held on June 17, 2014, in Sofia. The event was organized by INSMARKET.bg in partnership with ABZ and BCK.

The earthquake is a disaster which carries the greatest natural risk - 35% of the damage and victims of natural disasters are caused by earthquakes.

"Direct material compensation of the population has its strong points: it is timeless based on the explanation of the necessity to conclude voluntary property insurance; it may provide wide insurance coverage of the private properties, crops and livestock. However, in order to make such a solution work efficiently, a tariff system in accordance with the seismic-risk insurance map should be implemented," said Kiril KIROV, Risk assessment consultant.

This approach has also some weaknesses, in particular the element of "Compulsory" in terms of low income of the population. Currently, the level of penetration of property insurance is less than 7-9%.

In Europe, there are two approaches of solving problems associated with catastrophic risks. First, there is a mixed approach involving government and private insurance companies. For this it is necessary to introduce compulsory insurance against catastrophic risks and involve the public in the implementation of this type of insurance, said Alfonso IBANEZ, Deputy Director of the "Research and International Relations", within the catastrophic insurance program in Spain.

The sponsors of the International Conference entitled "Catastrophic risks in Bulgaria - the hierarchy of responsibility" were AIG Europe Ltd (representative office in Bulgaria), ALLIANZ Bulgaria, ARMEEC, VICTORIA and GENERALI Insurance.

To download the presentations - click here!

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