Policies covering catastrophes: new obligations for Italy-based companies and insurers
On 27 February 2025, Decree no. 18, drafted by the Ministry of Economy and Finance and the Ministry of Enterprise and Made in Italy, was finally published in the Official Gazette no. 48.
The aim of the decree is to regulate the implementation and operating procedures for policies covering catastrophes.
The so-called Milleproroghe decree states that, as of 31 March 2025, corporate entities have to take out – and insurers have to offer – policies covering certain natural catastrophes.
Here’s a brief summary of the key points.
Which corporate entities have to comply with the new insurance obligations?
- Companies with their registered office in Italy.
- Companies with their registered office abroad with a permanent establishment in Italy that have to be registered in the Register of Companies pursuant to Article 2188 of the Civil Code.
Only agricultural companies are excluded.
Which assets have to be insured?
All fixed assets referred to in Article 2424, first paragraph, section Assets, item B-II, numbers 1), 2) and 3), of the Civil Code, for any reason whatsoever used in the conduct of business, ie:
- land
- buildings
- plant and machinery
- industrial and commercial equipment
Which catastrophic events have to be insured?
Coverage doesn’t include all natural events but only the following catastrophic events:
- floods, inundations and overflows
- earthquakes
- landslides
The decree specifies if these events continue within 72 hours from the first event, they’re considered as a single event.
What are the coverage exclusions?
The decree provides the following coverage exclusions:
- property encumbered by building abuse or constructed without the required permits or encumbered by abuse arising after the date of construction
- damage that’s the direct consequence of active human behaviour or damage to third parties caused by the insured property as a result of events
- damage that’s the direct or indirect consequence of acts of armed conflict, terrorism, sabotage or riot
- damage relating to nuclear energy, weapons, radioactive, explosive or chemical substances or resulting from pollution or contamination
Which deductibles apply?
- 15% for assets with a value up to EUR30 million
- parties are free to negotiate for assets valued at over EUR30 million and for large companies (ie those with an income higher than EUR150 million and with 500 or more employees)
What are the applicable limits?
- 1 million in case of assets valued up to EUR1 million
- 70% for assets valued between EUR1 million and EUR30 million
- parties are free to negotiate for assets valued at over EUR30 million and for large companies (ie those with an income higher than EUR150 million and with 500 or more employees).
What are the consequences for companies that don’t comply with the obligation?
The Budget Law for 2024 already stated that non-compliant companies won’t benefit from contributions, subsidies or facilitations of a financial nature from public resources, including those provided for during calamitous and catastrophic events.
Future scenarios
What will change for companies and entrepreneurs?
According to Article 4 of the Decree, the measures companies take to prevent risks and protect the insured fixed assets must be considered when determining the premium. For example, earthquake-resistant real estate will be assessed as less risky.
On one hand, this will create a greater culture of risk prevention; on the other hand, it will also likely generate additional costs, not only related to insurance premiums.
When taking out policies, insurance companies ask for an assessment of the assets to be insured to evaluate the risk. Omissions and reticence at the stipulation stage may lead to coverage exclusion.
However, the entrepreneur is not always able or knowledgeable enough to carry out an assessment and they might need the help of a technician.
Are insurers subject to the duty to insure?
Insurance companies subject to the duty to insure include:
- all insurance companies, either individually or as a member of a group;
- licensed in Italy to underwrite non-life insurance business under class 8, including FOE or FOS insurers; and
- that individually or at group level, actually underwrite the risks listed in the Decree (see above).
For insurance groups (with an Italian ultimate parent company), one or more undertakings of the group can be designated as entities authorized to fulfil the insurance obligation set out under the decree.
What are the consequences if insurers don’t comply with the duty to insure?
Insurance companies that refuse or evade their “duty to insure” can be sanctioned with a fine of between EUR100,000 and EUR500,000.
Which obligations do insurers have to fulfil?
- Insurers have to adopt new policy wordings that comply with the new law no later than 30 days from the decree date of publication.
- For policies already in force, adjusting them to the provisions of the law will take effect from the first renewal.
- To ensure the transparency and competitiveness of insurance service offers, insurers will have to publish on their website all information documents and insurance terms and conditions.
- Insurers will have to define their risk appetite, consistent with their overall solvency needs, and set their risk tolerance limits.
Are there any forms of reinsurance for insurance companies?
Insurance companies can transfer the risks arising from their entire portfolio of policies covering catastrophic events to SACE S.p.a. Policies that don’t comply with legal requirements are excluded from the reinsurance coverage.
SACE will act as reinsurer, indemnifying up to 50% of the indemnities paid by insurance companies. The coverage will be capped at EUR5,000 million for 2024. For 2025 and 2026, the cap will be the greater of EUR5,000 million or – as at 31 December – the available free resources of the previous year that weren’t used for indemnity payments in the reference year.