[ad_1]
Today, rebuilding Lisbon after an earthquake similar to the one in 1755 would cost nearly €10 billion. Who can afford to do this? Since nearly half of Portuguese households have no insurance at all (47%), only a third have fire or multi-risk insurance (34%), and less than a fifth have earthquake risk insurance (19%), there is an urgent need to establish adequate means of protection, especially as extreme weather events become more frequent and the damage they cause is considerable.
This warning was reiterated by the Portuguese Insurance Association (APS), backed by the losses caused by floods, storms and fires in the past decade, which have resulted in insurance companies guaranteeing compensation of €609 million. But many families will see their property disappear or destroyed by extreme natural phenomena, especially since the insured values often underestimate the real value of the buildings and even the compulsory insurance (against fire) is often ignored. The solution could involve creating a fund and making it mandatory for households to have such insurance, as the APS advocates. But the response is already late.
The earthquake that shook the country that night was also a shock to reality. Although the magnitude of 5.3 on the Richter scale was widely felt and recorded, this time no regrets were caused. But the potential damage should not be ignored. “The seismic risk is the greatest catastrophic risk facing the national territory, and in more severe events, the losses could reach 20% of GDP”, explained José Galamba de Oliveira, president of the APS, in a recent interview. Defending the urgency of “immediate action to address the growing risks posed by climate change”.
Her Own The Assembly of the Republic approved a proposal The Climate and Earthquake Risk Guarantee Fund was established on March 2, 2023. The Insurance and Pension Fund Supervisory Authority (ASF) was tasked with developing a regulation, which was supposed to be delivered in March but is still being finalized. Confirm the agency with ECOSo far, there has been no progress. To ECO, ASF President Margarida AguiarConfirming that the project is ongoing, the political decision on its financing should be made by the new government.
A fund similar to the one set up by several European countries – led by Spain, which created the “Consortium” in 1972 and has allowed it to cover costs such as the damage caused by the Canary volcano in 2022 – would help create the means for the Portuguese State to be able to cope with the huge losses that could result from seismic phenomena or the effects of increasingly frequent extreme weather events.
Garamba de Oliveira believes that the system should prioritize earthquake risks through a state fund that would allow policyholders, insurers and reinsurers to share costs, and then extend to climate phenomena. This division of labor would allow the state to escape a larger bill, acting only when the remaining layers of protection are exhausted or when it intends to receive some specific support.
This would involve making earthquake risk insurance mandatory, as well as setting up a check mechanism to guarantee that car owners are actually safe, similar to what already happens with car insurance. Ensuring these conditions would allow “to cope with the 8 billion euros of global capacity for the insurance part in the most effective APS scenario in 2018”. The director estimates that these values must be updated to current prices, but these assumptions would bring “the average cost of earthquake coverage to less than 50 euros per year”.
Recalling the study presented by APS in October, of the country’s approximately 6 million households, 3.2 million have “structures protected by fire or multi-risk policies”. Only a third of these have specific coverage for earthquake risks. “The total amount of insured funds incurred by fire and multi-risk policies worldwide amounts to €514 billion”, equivalent to an average of €161,000 per household (€171,000 for policies that include earthquake risk coverage). This is a rare occurrence when an extreme event means not only the total loss of a home, but also extensive damage to access roads, basic infrastructure, and private and public property.
[ad_2]
Source link
