The program - a Disaster Preparedness and Resilience Development Policy Loan with a Catastrophe Deferred Drawdown Option (Cat DDO) - aims to help the Croatian government mobilize resources quickly after disasters, support emergency response and ensure resilient recovery. One key element of the program is its attention to expanding insurance coverage and closing the protection gap exposed by recent catastrophic events.
Croatia has a rather significant exposure to risks as earthquakes, floods, landslides, heatwaves, droughts and wildfires. Average annual economic losses from such events are estimated at about 0.8 % of GDP, and the devastating 2020 earthquakes inflicted around EUR 16.1 billion in damage and losses - equivalent to approximately 24 % of GDP.
Despite these risks, insurance protection for homes and property remains strikingly low in Croatia. Estimates suggest that only about 20 - 25 % of residential properties are covered by insurance, and a much smaller share have specific coverage for earthquakes or other natural hazards. This means the vast majority of homeowners - more than 75 % - could bear the full financial burden of disaster losses themselves or rely on government support after major events.
The World Bank program explicitly seeks to address this gap. In addition to strengthening infrastructure and institutional capacity, the initiative includes measures to encourage the uptake of disaster insurance and to support recovery for vulnerable populations. By embedding insurance uptake in national resilience reforms, the project aims to shift more risk from the public balance sheet and individual households to private risk transfer mechanisms — a central tenet of modern disaster risk financing.
Insurance as part of financial resilience
A cornerstone of the program is the Cat DDO, which allows Croatia to access contingent financing immediately after a qualifying natural disaster. However, contingent financing alone does not substitute for comprehensive private insurance coverage. Low insurance penetration - particularly for earthquake and other natural hazard risks - leaves households and the economy exposed. According to risk financing analyses, only a small fraction of Croatian disaster losses are currently covered by insurance, well below the EU average, contributing to a substantial protection gap.
To help close this gap, the World Bank and Croatian authorities plan initiatives such as public awareness campaigns, incentives for property insurance purchase, and technical support for insurance market development. Encouraging broader insurance coverage is expected not only to protect individual homeowners but also to reduce post-disaster fiscal pressures on government budgets and speed economic recovery.
Deputy Prime Minister and Finance Minister Marko Primorac highlighted that, beyond infrastructure upgrades and institutional reforms, bolstering financial protection for citizens is a priority for building resilience in the face of escalating climate and geological risks.
As global climate change increases the frequency and severity of natural hazards, strengthening both public and private disaster risk financing instruments - including insurance - will be key to safeguarding Croatia’s citizens, homes and economic gains.
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