Insurance and climate risk in Italy: An evolving landscape

The Italian insurance supervisory authority (IVASS) recently released its 2025 annual monitoring report on natural disaster risks and sustainability. The report provides an overview of the assessment of catastrophe-related exposures and their implications for sustainability.

The analysis is based on a survey conducted on 89 insurance companies operating in Italy in the life and non-life sectors, representing approximately 85% of total market premiums. The report fits in a broader context of growing attention, at both national and European level, on managing catastrophic risks and the strengthening of economic resilience, including through targeted regulatory measures.

The growing frequency and severity of catastrophic events in recent years have made insurance coverage increasingly central from both an economic and a regulatory standpoint. Against this backdrop, in Italy the 2024 Budget Law (Art. 1, paragraphs 101 et seq., Law of 30 December 2023) introduced an obligation for all companies with registered offices or permanent establishments in Italy, and listed in the Companies Register pursuant to Article 2188 of the Italian Civil Code, to take out insurance policies covering damage to land, buildings, plants, and commercial equipment resulting from earthquakes, floods, landslides, and inundations occurring in the national territory.

To ensure the effective implementation of this requirement, the same law delegated the definition of the relevant procedures to a decree issued by the Minister of Economy and Finance and the Minister of Enterprises and Made in Italy. These implementing provisions are set out in Interministerial Decree No. 18 of 30 January 2025.

IVASS’s report examines the growing intensity of extreme weather events, highlighting how this trend has translated into a marked rise in economic losses in recent years. As a direct consequence, the growing frequency and intensity of these events have had an immediate impact on the number of claims.

The document highlights the importance of insurance as a key tool for risk management and transfer, underscoring its role in ensuring economic protection and supporting system stability in the face of catastrophic shocks.

The data presented in the report shows a significant increase in damages related to natural events over the period 2018-23: claims costs rose from approximately EUR1.5 billion-2 billion per year to over EUR7 billion in 2023. At the same time, however, premium income for catastrophic risks amounted to EUR2.8 billion, covering only 7.1% of total claims.

The market shows a high level of concentration: approximately 70% of NatCat policy premiums are allocated to the “fire and other property damage” sector, while the remaining 20-25% are concentrated in the “other non-life insurance” sector. Focusing on climate risks, premium income in 2023 amounted to EUR2.4 billion, with hail representing the predominant share (66.5%), followed by storms (21.1%) and floods (12.4%).

Against this backdrop, 2023 marked a clear turning point, as the ratio of total expenses (claims and costs) to premiums rose sharply to 352%. The situation proved particularly critical for hail risk, which alone accounted for 73.9% of the total value of climate-related claims.

From a methodological standpoint, however, the report highlights that only a limited number of non-life insurers currently adopt modelling and climate risk pricing techniques that fully incorporate the three key dimensions identified in European legislation: risks related to climate change, the combined use of historical and forward-looking data, and the integration of prospective scenarios.

Nevertheless, climate adaptation initiatives are showing a gradual increase. Integration into product design rose from 41.5% in 2022 to 45.8% in 2023, while innovative coverage solutions expanded significantly, increasing from 47.2% to 63.5%, mainly through greater policy customisation and the introduction of additional claims management services.

At the same time, the rise in claims – particularly those linked to extreme weather events –has driven a 38.2% increase in reinsurance cessions, confirming the central role of reinsurance in risk mitigation. In this context, reinsurance plays an essential role in ensuring the stability of the insurance system, as also highlighted in the Reinsurance Advisory Board report “Closing the gap, not the market. A reinsurer's blueprint for NatCat resilience in Europe.”

More broadly, reinsurers contribute significantly to absorbing the impacts of catastrophic events. Global reinsurance capital almost doubled between 2015 and 2024, rising from USD357 billion to USD655 billion, according to Gallagher Re, with an additional USD114 billion in alternative capital.

This level of capacity enables the provision of coverage for NatCat events both in Europe and globally, supporting a more resilient, sustainable, and accessible insurance market.

Overall, the evidence emerging from the IVASS report highlights how insurance is becoming an increasingly essential pillar for managing and absorbing the growing impact of natural catastrophe risks, while at the same time revealing the structural tensions affecting the sector. On the one hand, the widening protection gap and the sharp imbalance between premiums and claims confirm the systemic importance of insurance in safeguarding economic stability and supporting climate adaptation. On the other hand, the rising frequency and severity of events, together with high loss ratios and market concentration, underscore the delicate equilibrium insurers have to maintain between coverage availability and technical sustainability.

Insurance companies face increasing complexity, not only in underwriting and pricing risks – requiring more advanced models, forward-looking data, and scenario analysis – but also in drafting policy terms that clearly allocate risks, and limits in a rapidly evolving risk landscape. These challenges create an opportunity for the insurance sector to strengthen its role as a key enabler of resilience, innovation, and sustainable economic development in the face of future climate-related risks.