Italian earthquake: the costs will fall on the government

According to rating agency S&P, the Italian insurance industry will be not be significantly affected by the recent M6.2 earthquake that almost destroyed the town of Amatrice and its surroundings.

Although total losses could reach $11bn, according to the Italian Civil Protection Department, S&P gross insurance industry losses are not expected to exceed $225m, according to estimates by S&P.

“We expect the domestic insurance sector to face low final costs from the earthquake,” said S&P Global Ratings analyst Taos Fudji. “Because property insurance in Italy is not particularly well developed, the cost of rebuilding will fall mainly on the government.” 

Although prone to earthquakes, Italy has low levels of insurance penetration: “Earthquake insurance policies remain unattractive to consumers due to their high cost and Italians’ expectations of government intervention,” said Fudji. “We consider that some form of government funding or tax credit, as exists in other countries, could incentivize private sector subscription to coverage of these risks.”