In Europe, Italy has the largest population living in flood-prone areas and has been affected by major flood events in 1994, 2000 and 2002. Despite this, insurance penetration for flood remains low in comparison to other European countries, and is currently estimated at less than 10%. This insurance penetration rate reflects reluctance to obtain insurance, due to high premiums and reliance on state relief, and potentially inadequate risk awareness.
New research by JBA using our Italy River Flood probabilistic model suggests annual average loss (AAL) from flooding for residential buildings could be as high as €300 million. With less than 10% of that figure insured, over 270 million euros of uninsured loss to residential buildings is estimated to occur in Italy on average each year.
The probabilistic model also suggests that 60% of the AAL to residential buildings is concentrated in just 5% of Italy's CRESTA zones. This is a common feature of developed countries, and highlights the need to distribute exposure intelligently to avoid overexposure to natural perils. For flooding, this is especially important due to the highly localised nature of the peril, with hazard varying between adjacent properties. Consequently, JBA's Italy model is underpinned by 10m hazard mapping and takes into account the spatial correlations in flood events in order to most accurately model flood losses.
Highlighted in orange: the 5% of high resolution CRESTAs that contribute to 60% of Italy's residential buildings AAL.
In a market with significant potential for growth and with such a large population at risk, it will become increasingly important for insurers growing their business to understand their exposure to flooding. If you would like to find out more about JBA's Italy River Flood probabilistic model, please contact us.
- European Environment Agency (2016) ' Floodplain management: reducing flood risks and restoring healthy ecosystems', http://www.eea.europa.eu/
- Gizzi, F.T., Potenza, M.R. & Zotta, C. (2016) 'The Insurance Market of Natural Hazards for Residential Properties in Italy', Open Journal of Earthquake Research, 5, 35-61
- Porrini, D. (2015) 'Risk Classification in Natural Catastrophe Insurance: The Case of Italy', International Journal of Financial Research, 7(1) 39-49
Authors: Naomi Booth and Jessica Boyd