Effective March 31, all companies in Italy will be required to purchase property insurance coverage for natural disasters. Despite industry efforts to delay, the Italian government has rejected requests for the new regulation to be postponed. Noncompliance with the new requirement may result in sanctions and loss of government incentives.
Here’s what businesses need to know.
Coverage requirements
All companies in Italy, excluding agricultural companies, must insure buildings, equipment, and land against natural disasters, including floods, inundations, earthquakes, and landslides.
For sums insured up to €1 million, 100% coverage is required. Deductibles cannot exceed 15% of the payable loss. For sums insured between €1 million and €30 million, 70% coverage is required, with deductibles not exceeding 15% of the payable loss. For sums insured over €30 million and for large companies, limits and deductibles will be freely negotiated.
Insurers failing to provide solutions face sanctions ranging from €100,000 to €500,000. Companies not complying may lose government financial incentives and grants.
Land must be insured on a first loss basis (based on a preagreed value or limit) in proportion to the surface of the insured area. The new regulation specifies that “costs of clearing, reclamation and restoration of the mechanical and topographical characteristics of the land to a condition equal to that prior to the insured event” must be covered.
Timeline and open questions
Companies without property insurance must purchase cover by March 31, 2025. For existing policies, the requirements apply from the next renewal date or premium installment.
Despite the initial introduction of the regulation over a year ago — and the recently announced effective date — the interpretation of the regulation continues to develop. Specifically, clarification is needed on:
Whether the decree stipulates (or implies) that required coverage must be insured via a local admitted policy. Will admitted coverage via a European “freedom of services” policy be considered compliant? It is generally understood at this time that nonadmitted coverage via a master policy will not be considered compliant, although this could change as things develop.
Whether natural catastrophe coverage must be endorsed onto local policies effective March 31 or be addressed at the next renewal date or premium installment for insured that currently have local admitted property policies.
Whether the term “premium installment” is meant to address multiterm policies and/or policies billed on an installment plan (for example, monthly or quarterly, etc.).
The methodology for calculating the value or limit based on the surface of the insured area. Clarification is also required on whether this would only apply to locations where an insured owns the land.
Taking action
Given these ambiguities, it is vital that companies work with their insurance brokers to review their Italian property exposures and take steps to comply with the new requirements as they renew their insurance programs.
Lockton Global Solutions stays ahead of changing insurance regulations around the world and has been working with our local stakeholders on this issue since its onset. We are working with our Italian Partner, MAG, and Lockton Specialty in London to offer capacity for stand-alone programs.
For more on how you can stay informed and ensure compliance to protect your assets and operations, please contact our team.
