Mandatory catastrophe insurance

On 30 December 2023 the Italian Parliament issued the Budget Law for 2024 fiscal year.

It provides – for the first time – a specific duty for corporate entities to buy policies covering earthquakes, floods and landslides.¹ Corporate entities have to comply with such duty by 31 December 2024.

 

Which entities are subject to the insurance duty?

Corporate entities with registered office in Italy and the foreign ones with a permanent establishment in Italy. Agricultural companies are excluded.

 

Which assets are to be covered by the insurance?

The assets covered by the insurance are tangible fixed assets consisting of land and buildings, plant and machinery, industrial and commercial equipment.

In case of breach of the insurance duty, the company will be excluded from receiving public contributions, including those provided for calamitous and catastrophic events.

 

Insurers‘ duty to contract

Insurance undertakings are under a duty to insure catastrophic events. Breach of such duty is punishable by an administrative fine imposed by IVASS (from EUR100,000 to EUR500,000).

Insurance companies can offer coverage either by directly assuming the entire risk or in co-insurance or in consortium through a plurality of undertakings. In this case, the consortium must be registered in the CONSAP Register and authorized by IVASS, which assesses its capacity.

 

Insuring grant

The deductible cannot exceed 15% of the damages and insurance premiums must be proportional to the risk.

By decree of the Minister of the Economy and Finance and the Minister of Business and Made in Italy, further implementation and insurance schemes may be introduced to determine which catastrophic events are to be insured and the limits to be provided.

 

Public reinsurance

Reinsurance by SACE S.p.a. (an Italian insurance-financial group, directly controlled by the Ministry of Economy and Finance, specialised in supporting businesses and national economic fabric) is authorized to reinsure private market insurers up to 50% in respect of the indemnities they have to pay in case of a catastrophic event, in any case not exceeding EUR5 billion for each of the years 2024, 2025 and 2026.

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The above new rules have already entered into force, even in the absence of the decree of the Minister of the Economy and Finance and the Minister of Business and Made in Italy, which shall provide details of such coverage. In November 2023, after the Draft Budget Law was issued, the President of ANIA (National Association of Italian Insurance Companies) stressed that it would have been advisable to wait for the indications of the Ministries first, which will hopefully be provided soon. In particular, indications on limits are expected.

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¹See Article 1, paragraphs 101-111.