SLOVENIA: only 43% of the losses caused by natural disasters throughout the last 4 decades were covered by insurance

6 March 2024 — Daniela GHETU
Between 1980 and 2020, economic losses caused by natural disasters in Slovenia totaled EUR 3.8 billion. Only 43% of these losses were insured, which corresponds to an amount of EUR 1.6 billion, the figures indicating a significant gap in insurance coverage, data provided by the Slovenian Agency of Insurance Supervision (AZN) show. 

According to EIOPA data, the prevalence of flood insurance in Slovenia is below 25%. According to AZN, affordability remains a challenge, as between 25 and 50% of the population cannot afford flood insurance. “This gap became particularly evident last year during the large-scale natural disasters. The insurance coverage proved to be insufficient, covering only about 16% of the value of the economic damage. These circumstances point to the urgent need for a strategy to increase the spread and affordability of insurance in Slovenia,” an article published on AZN’s website states.

The current situation is all the more important considering the year 2023 was marked as the warmest year in the last 176 years, according to the National Assessment and Climate Administration. The average temperature increased by 1.18 °C compared to the 20th century and exceeded the pre-industrial average by 1.35 °C. This extreme warming has led to an increase in extreme weather events worldwide, indicating an urgent need for effective solutions for so-called NatCat (natural catastrophes, op. a.) insurance.

For Slovenian insurers, 2023 was market by record high NatCat claims. Overall, gross written claims amounted to EUR 2,256 million, which is EUR 589 million or 35.3% more than in 2022, when they amounted to EUR 1,667 million. Out of this more than half billion increase in claims expenses, the property insurance classes provided for the highest share, claims paid increasing by EUR 213 million, mainly due to last year's repeated storms with hail and floods in August.

Insurance should assume the role of a promoter of stability, providing a key cover for individuals, companies and society against severe financial losses and accelerates recovery processes. Insurance also promotes long-term economic planning and investment and contributes to overall regional stability, particularly in areas susceptible to climate risks. However, when talking about the role of insurance, it is important to understand the relationship between (strict) legislation and a strong insurance industry, especially in relation to natural disaster insurance. The insurance gap, characterized by the share of uninsured economic losses in catastrophic events, is the result of a variety of factors, including limited market availability, affordability issues, and lack of policyholder awareness, a paper recently prepared by AZN states.