Umbria Italy quake loss hiked 64% to EUR108m, just 1.5% insured

The insurance and reinsurance industry loss from the deadly M6.2 earthquake that struck Italy, near the Umbrian town of Norcia in August 2016 has been increased by 64% to EUR 108 million, but that still only leaves 1.5% of the economic impact covered, according to catastrophe loss data aggregator PERILS AG.

The Italian earthquake resulted in around 300 deaths and damaged homes and businesses across a wide area of the Umbria region.

With a significant proportion of homes and structures badly damaged or destroyed in the quake in many towns the event underscored the dearth of insurance coverage in the region and that the insurance and reinsurance industry would pay little for such a major event.

PERILS AG, the independent Zurich-based provider of industry-wide catastrophe insurance data, industry loss estimates and data for use in reinsurance or catastrophe bond triggers, had put its first estimate of the industry loss at EUR34 million in October 2016.

PERILS then almost doubled the industry loss estimate of property insurance market impacts due to the Italian earthquake, increasing it by over 94% to EUR66 million in November 2016.

Now, demonstrating the significant uncertainty associated with collecting loss data from a complex earthquake event in a region that lacks insurance, the tally has risen significantly again, jumping 64% to EUR 108 million.

PERILS explained why it has persisted in aggregating data on this loss event, despite the relatively low insurance and reinsurance market impact.

“While this loss estimate is significantly below PERILS’ standard EUR 200m loss capture trigger for European events, it has nevertheless been captured given the significant socio-economic impact of the earthquake,” the company explained.

The economic loss from this earthquake has been estimated at EUR 7.1 billion, by the Italian Civil Protection Agency, which given the insurance market loss is only EUR 108m, according to PERILS, means that 1.5% of the overall economic loss was covered by insurance. As a result the loss to reinsurance interests was not significant.

Further demonstrating the difference in insurance penetration across regions in Italy, the Emilia-Romagna earthquakes in 2012 saw PERILS estimate the insured loss at EUR 1.24 billion, which represented 9.3% of the total rebuilding costs of EUR 13.3 billion, estimated by the Italian National Council of Engineers.

However even that is low, as in reality an earthquake event should be largely an insurance loss, not an economic loss, in any developed economic and financially mature region of the world.

These events reflect the significant opportunity for insurance and reinsurance players to help increase coverage penetration, but also highlight the challenges faced in getting there, even in advanced economies such as Italy.