PERILS adds 66% to October 2016 Italy quake loss, now EUR208m

The insurance and reinsurance industry loss estimate for the series of earthquakes which hit Central Italy between the 26th and 30th October 2016 has risen significantly again, as PERILS AG added another 66% to the total industry bill, taking it to EUR 208 million.

It’s the second significant increase in loss estimate that PERILS AG, a provider of insurance and reinsurance industry loss estimates and data, has given for this event, highlighting the difficulty in estimating loses from earthquakes and their potential to develop slowly.

PERILS gave an initial estimate of EUR 31 million on the 7th December 2016, after the Magnitude 5.4, 5.9, and 6.5 earthquakes all struck the Central Italy, Lazio, Marche and Umbria regions between the 26th and 30th October 2016.

This was followed up with a huge increase on the 26th January 2017, when PERILS hiked the industry loss estimate by more than 300% to EUR 125 million.

The task of estimating industry losses from earthquakes is not easy and the insurance and reinsurance sector had a particularly difficult job in the case of these Italian quakes, given their complexity and the topography of the region affected.

Now, the third and final loss estimate has been released by PERILS for these earthquakes and the re/insurance industry toll has jumped by 66% to EUR 208 million.

These earthquakes provide another example of the protection gap in a developed country, as with the estimate of economic losses put at EUR 16.5 billion by the Italian Civil Protection Agency, it means just 1.3% of the overall economic loss was insured.

Another earthquake that occurred on the 24th August in a similar area saw an insurance loss of EUR 108 million, which was just 1.5% of total estimated economic costs of EUR 7.1 billion. The Emilia-Romagna earthquakes in Northern Italy in 2012 saw an EUR 1.24 billion insured loss, which was just 9.3% of total estimated rebuilding costs of EUR 13.3 billion.

Earthquake insurance penetration across Italy is woefully low and the insurance and reinsurance market has a difficult task to increase this. The capital markets could assist, but with ample reinsurance capital and very low rates in Europe it is the major regional players that are likely to take the lions share of any increase in coverage at first.

The Italian quakes in 2016 did negatively affect a number of ILS funds and sidecars, which reported attrition and that certain contracts were at risk. However loss estimates to ILS interests for these events were said to be extremely minimal, and likely commuted or settled by now.