Property catastrophe insurance —

national examples*
*Click on the map to go to the relevant page
 Property catastrophe insurance

Introduction

Insurers around the world play a key role providing coverage for losses caused by natural hazards and advising policymakers in the
design of disaster risk management and financing strategies. However, their involvement and responsibilities vary depending on the
legal framework and the exposure to natcat risks in each country. Insurance solutions therefore vary greatly between jurisdictions,
ranging from optional private solutions to compulsory covers and national pools covering certain risks.

In order to better understand these differences and inform the debate on enhancing climate resilience, GFIA has compiled information
about various natural disaster insurance solutions and schemes across the world. The charts, published in the context of GFIA’s
engagement at COP26, provide information on a number of markets, including data on coverage and market penetration for selected
natural catastrophe risks, for both individual and commercial insurance lines.
 Property catastrophe insurance

Australia

The provision of insurance in Australia is regulated by the Insurance Contracts Act 1984. The Act contains a “standard cover” regime
which encompasses certain retail insurance products, including residential home and contents policies. The cover is integrated in
home insurance, comprehensive motor insurance, sickness and accident insurance, consumer credit insurance and travel insurance.

However, an insurer is free to market policies that offer less than the standard cover, but they need to inform the insured of this deci-
sion. Until the insured is properly informed, the standard cover applies. If an insurer fails to inform the insured, the contractual terms
are adjusted so that the policyholder receives standard cover. The reason insurers generally offer less than the standard cover is to
keep premiums affordable.

The standard cover regime only applies to individual lines, not to commercial insurance contracts.

In addition, the Australian government is currently developing a statutory reinsurance pool to provide coverage for certain property
risks in Northern Australia. This part of Australia is prone to damage from tropical cyclones and this has contributed to affordability
concerns in relation to the price of home and contents insurance cover. The aim of the reinsurance pool is to reduce the cost of these
premiums for consumers.

Commercial lines
Market
Optional/
Peril Compulsory cover Standard cover penetration —
additional cover
commercial lines1
Windstorm ✓ 87.2%
Hailstorm ✓ 87.2%
Lightning — direct hit ✓ 87.2%
Lightning — surge ✓ NA
River flooding ✓ NA
Overflow of stagnant waters ✓ NA
Torrential rain ✓ 87.2%
Storm surge ✓ 87.2%
Earthquake ✓ 87.2%
Snow pressure
Avalanche
Frost
Landslide
Subsidence
Collapsing sinkhole
Volcanic eruption
Meteor strike ✓ 87.2%
Tsunami ✓ 87.2%
Bushfires/Wildfires ✓ 87.2%

1 A 2015 report by the Insurance Council of Australia on non-insurance in the SME sector estimated the level of non-insurance in Australia at 12.8%. Similarly to individual
lines, the coverage of natcat perils is standard, with the exception of flood which is an optional cover.

1/2
 Individual lines
Market
Optional/
Peril Compulsory cover Standard cover penetration —
additional cover
individual lines2
Windstorm ✓ 89%
Hailstorm ✓ 89%
Lightning — direct hit ✓ 89%
Lightning — surge ✓ NA
River flooding ✓ ✓ 89%
Overflow of stagnant waters ✓ NA
Torrential rain ✓ 89%
Storm surge ✓ 89%
Earthquake ✓ 89%
Snow pressure
Avalanche ✓ 89%
Frost ✓ 89%
Landslide ✓ 89%
Subsidence
Collapsing sinkhole ✓ NA
Volcanic eruption ✓ 89%
Meteor strike ✓ 89%
Tsunami ✓ 89%
Bushfires/Wildfires ✓ 89%

2 The Australian Consumer and Competition Commission (ACCC) in its Northern Australia Insurance Inquiry (Final Report, November 2020) estimated that the national
rate of non-insurance for homes was 11% (p.279). Where coverage of a natcat peril is in effect compulsory by design due to the standard cover regime, this translates to
an 89% penetration rate.

2/2
 Property catastrophe insurance

Brazil

There are no public natcat insurance schemes for individuals and businesses. Insurance cover for natcat is provided by private insur-
ance companies only. The government, however, created the Rural Insurance Premium Subsidy Program (PSR), providing financial
assistance to farmers who wish to protect their crops and livestock against natural disasters and climate change-related risks. The
PSR allows farmers to insure their production at a reduced cost.

To avail themselves of this opportunity, farmers must select an insurance company authorised under the PSR by the Ministry of Agri-
culture. The insurer receives a subsidy (ranging from 20% to 40%) from the government to offer lower premiums.

The rules are updated every three years. Based on the latest update (June 2021), there is a limit of R$60 000 (US$11 000)of financial
assistance per year per type of production (agriculture, livestock, fisheries, forestry). The annual limit of financial assistance is set at
R$120 000 per beneficiary.

Compulsory Standard Optional Market

Peril
cover cover cover penetration
Windstorm ✓ NA
Hailstorm ✓ NA
Lightning — direct hit ✓ NA
Lightning — surge ✓ NA
River flooding ✓ NA
Overflow of stagnant waters ✓ NA
Torrential rain ✓ NA
Storm surge ✓ NA
Earthquake
Snow pressure
Avalanche
Frost ✓ NA
Landslide ✓ NA
Subsidence
Collapsing sinkhole
Volcanic eruption
Meteor strike
Tsunami
 Property catastrophe insurance

Canada

In Canada, insurance coverage is optional for homeowners. Hail, fire following earthquake and wildfire are all covered under a stan-
dard homeowner insurance policy, if purchased. Other natcat events are not usually covered by home insurance except through
optional purchase (eg, overland flooding, including flash floods and earthquake shake coverage). Additional cover is widely available
for damage caused by water, such as seepage, sewer back-up or overflow of a body of water. There is limited availability of optional
storm surge coverage.

There are federal, provincial and territorial government programmes that provide financial assistance following a disaster. The Disas-
ter Financial Assistance Arrangement (DFAA) is a federal programme that covers damage resulting from large-scale disasters and
that transfers funds to provinces/territories following events such as spring flooding or forest fires. The expenses covered by the DFAA
include evacuation costs, repair costs of public works and infrastructure, and the repair of essential personal property of individuals,
small businesses and farmsteads.

The DFAA does not provide direct support to impacted individuals. Rather, it provides cost recovery assistance to provincial and
territorial governments. Provinces and territories provide financial aid for their residents. The programme is funded by federal tax
revenues. A per capita threshold is used to reimburse provinces/territories for specifically identified disaster aid expenditures.

Each province/territory is responsible for the first C$3.27 of eligible per capita costs. The next C$6.56 per capita is shared between
the province/territory and the federal government (50-50). The federal government pays for 75% of the following C$6.56 and any
damages beyond this point are reimbursed 90% by the federal government for.

Optional/ Market Market

Compulsory Standard
Peril additional penetration — penetration —
cover cover
cover commercial lines individual lines
Windstorm ✓ NA NA
Hailstorm ✓ NA NA
Lightning — direct hit ✓ NA NA
Lightning — surge ✓ NA NA
River flooding ✓ NA NA
Overflow of stagnant waters ✓ NA NA
Torrential rain ✓ NA NA
Storm surge ✓ NA NA
Earthquake ✓ NA NA
Snow pressure ✓ NA NA
Avalanche ✓ NA NA
Frost ✓ NA NA
Landslide ✓ NA NA
Subsidence ✓ NA NA
Collapsing sinkhole ✓ NA NA
Volcanic eruption
Meteor strike
Tsunami ✓ NA NA
Wildfire ✓ NA NA
Fire following earthquake ✓ NA NA
 Property catastrophe insurance

France

Natcat cover for individuals and businesses is included in property damage and motor insurance contracts. A small surcharge applies
(12% of the property premium). Storm, hail, and snow are typically excluded from standard cover, but can be covered by spe-
cific compensation systems. Agricultural risk (property, but not crops) is covered. Cover for windstorm is mandatory, but is a separate
policy. Cover can be extended; the premium is based on risk rating.

Statutory deductibles can be adjusted with the implementation of prevention measures, based on land-use planning rules and con-
struction codes. Required risk prevention actions (both at local authority and individual level) are eligible for state subsidies, financed
through a prevention fund (Barnier Fund), which is fully funded by a levy (12%) on the natcat premiums collected.

The only difference between individual risks and commercial/business risks is the amount of the deductible, which is:

• For individuals: €380 for housing, vehicles and goods for non-professional use and €1 520 for drought and soil rehydration.
• For businesses: 10% of damage incurred (with a minimum of €1 140, except for drought, which is €3 050) unless a higher
deductible is specified in the basic guarantee.

State intervention

French insurers collaborate with the government through a public-private partnership.

For compulsory cover, the state:

• Provides a legal framework

• Defines the hazards concerned and the triggering event
• Sets the prices, the deductibles and the cover
• Offers insurers the possibility to get reinsurance through the public sector reinsurer CCR

Optional/ Market Market

Compulsory Standard
Peril additional penetration — penetration —
cover cover
cover commercial lines individual lines
Windstorm ✓ 100% 100%
Hailstorm ✓ 100% 100%
Lightning — direct hit ✓ 80% 80%
Lightning — surge ✓ 80% 80%
River flooding ✓ 100% 100%
Overflow of stagnant waters ✓ 100% 100%
Torrential rain ✓ 100% 100%
Storm surge ✓ 100% 100%
Earthquake ✓ 100% 100%
Snow pressure ✓ 100% 100%
Avalanche ✓ 100% 100%
Frost ✓ 50% 50%
Landslide ✓ 100% 100%
Subsidence ✓ 100% 100%
Collapsing sinkhole ✓ 100% 100%
Volcanic eruption ✓ 100% 100%
Meteor strike ✓ 100% 100%
Tsunami ✓ 100% 100%
 Property catastrophe insurance

Germany

Cover for storm, hailstorm, lightning strike and frost/overflow of water is usually bundled with fire insurance cover. Insurers typically
do not offer stand-alone natcat products, except in industrial lines. Cover for other perils can be added to the standard fire policy.

Tariffs are risk-based and tailored to individual policies. Individual and commercial lines usually include minor deductibles. Higher
deductibles may apply in zones with extreme risks. The implementation of prevention measures usually has a positive impact on the
premium.

The sale and underwriting are handled by insurers and brokers, based on risk-zoning information. The use of individual risk surveys
is common in commercial lines. The claims process is managed by insurance companies.

There is no state intervention and no public post-disaster compensation fund or national scheme for natcats. In the event of a large
natcat, the government may decide to offer ad hoc subsidies to support companies and individuals. This practice has resulted in a
“demand-problem”, with a number of small enterprises and homeowners not taking out natcat insurance as they expect the govern-
ment to intervene should an event occur.

Optional/ Market Market

Compulsory Standard
Peril additional penetration — penetration —
cover cover
cover commercial lines individual lines1
Windstorm ✓ 95% 95%
Hailstorm ✓ 95% 95%
Lightning — direct hit ✓ 99% 100%
Lightning — surge ✓ 70% 70%
River flooding ✓ 40% 47%
Overflow of stagnant waters ✓ 40% 46%
Torrential rain ✓ 40% 52%
Storm surge ✓ 1% 1%
Earthquake ✓ 40% 47%
Snow pressure ✓ 40% 47%
Avalanche ✓ 40% 47%
Frost ✓ 80% 80%
Landslide ✓ 40% 47%
Subsidence ✓ 40% 47%
Collapsing sinkhole ✓ 40% 47%
Volcanic eruption ✓ 40% 47%
Meteor strike
Tsunami ✓ 40% 47%

1 Ratio of the premium underwritten to insurable objects.

 Property catastrophe insurance

Italy

Insurance cover for most perils is optional. Coverage for certain perils is standard in basic fire insurance policies. The tariffs are set by
individual insurers and are therefore subject to market competition. The extent to which policyholders have implemented prevention
measures can influence the premiums.

There is no state intervention in the management of natcat risks.

Optional/ Market Market

Compulsory Standard
Peril additional penetration — penetration —
cover cover
cover commercial lines individual lines
Windstorm ✓ NA NA
Hailstorm ✓ NA NA
Lightning — direct hit ✓ NA NA
Lightning — surge ✓ NA NA
River flooding ✓ NA NA
Overflow of stagnant waters
Torrential rain ✓ NA NA
Storm surge ✓ NA NA
Earthquake ✓ NA NA
Snow pressure ✓ NA NA
Avalanche
Frost ✓ NA NA
Landslide ✓ NA NA
Subsidence ✓ NA NA
Collapsing sinkhole ✓ NA NA
Volcanic eruption ✓ NA NA
Meteor strike ✓ NA NA
Tsunami ✓ NA NA
 Property catastrophe insurance

Japan

Residential earthquake insurance is provided through a public-private partnership, in which the government reinsures the earthquake
insurance liabilities underwritten by private insurance companies.

Neither earthquake insurance nor fire (homeowner) insurance is compulsory. However, earthquake insurance is automatically bundled
with fire insurance policies, unless a policyholder explicitly requests an exclusion. Earthquake insurance cannot be purchased separately.
Fire insurance itself does not cover losses caused by fires that are the result of an earthquake or that spread because of an earthquake.

Residential earthquake insurance covers loss or damage to residential buildings and/or personal property due to fire, destruction,
burial, or flooding caused directly or indirectly by an earthquake, volcanic eruption or resulting tsunami. Private insurers offer insurance
products for other perils, including flooding, lightning strikes, windstorms, hailstorms and snow-related disasters. Whether cover for
such perils is offered, or included in standard polices or endorsements could vary among insurers and/or products.

The premium rate is calculated by multiplying the basic rate of the insurance premium (based on the structure and location of the
insured building) by a discount rate (based on the level of earthquake resistance). Policyholders set the amount insured in the
earthquake insurance contract, which should be within a range of 30-50% of the amount insured under the fire insurance contract.
Claims are processed on the basis of a simplified loss category system (total loss, major half loss, minor half loss, or partial loss) to
allow for fast claims pay-out. There are tax incentives to encourage people to take out earthquake insurance.

The government and private insurers work together to reinsure earthquake-related risks through a shared liability scheme (see chart
below). All residential earthquake insurance policies are ceded to Japan Earthquake Reinsurance, a reinsurer established by non-life
insurers to exclusively handle earthquake insurance. JER retrocedes the risk to insurers and the government up to their predefined
indemnity limits and retains any remaining indemnity.
125.9 266.1 ¥12 000bn

50%
Government’s Liability
¥11 775.1bn 99.75%
Private Insurers’
Liability
¥224.9bn
50%
0.25%

Optional/ Market Market

Compulsory Standard
Peril additional penetration — penetration —
cover cover
cover commercial lines individual lines
Windstorm ✓ ✓ NA NA
Hailstorm ✓ ✓ NA NA
Lightning — direct hit ✓ ✓ NA NA
Lightning — surge ✓ ✓ NA NA
River flooding ✓ ✓ NA NA
Overflow of stagnant waters ✓ ✓ NA NA
Torrential rain ✓ ✓ NA NA
Storm surge ✓ ✓ NA NA
Earthquake ✓ ✓ NA 30%1
Snow pressure ✓ ✓ NA NA
Avalanche ✓ ✓ NA NA
Frost ✓ ✓ NA NA
Landslide ✓ ✓ NA NA
Subsidence ✓ ✓ NA NA
Collapsing sinkhole ✓ ✓ NA NA
Volcanic eruption ✓ ✓ NA 30%1
Meteor strike ✓ ✓ NA NA
Tsunami ✓ ✓ NA 30%1

1 The figure is the ratio of the number of earthquake insurance policies to the number of households, including those living in rental accommodation who usually do not
purchase fire insurance. The figure excludes certain cooperative mutual aid products that cover earthquake damage.
 Property catastrophe insurance

Mexico

Natcat insurance is not compulsory and is offered by private insurers through the extension of home and business insurance policies.

Within the framework of the government’s risk management strategy, the Ministry of Finance established a pool to ensure compen-
sation for high-risk natcats. The pool aggregates the exposure of the different states.

Optional/ Market Market

Compulsory
Peril Standard cover additional penetration — penetration —
cover
cover commercial lines individual lines
Windstorm ✓ 18% 6.5%
Hailstorm ✓ 18% 6.5%
Lightning — direct hit
Lightning — surge
River flooding ✓ 18% 6.5%
Overflow of stagnant waters
Torrential rain ✓ 18% 6.5%
Storm surge ✓ 18% 6.5%
Earthquake ✓ 18% 6.5%
Snow pressure
Avalanche ✓ 18% 6.5%
Frost ✓ 18% 6.5%
Landslide
Subsidence
Collapsing sinkhole
Volcanic eruption ✓ 18% 6.5%
Meteor strike
Tsunami
 Property catastrophe insurance

Morocco

In 2020, the Moroccan government set up a specific scheme for natcat risks, covering floods, earthquakes and tsunamis, in addition
to man-made (environmental) disasters. The Moroccan scheme consists of two components:

• For the insured, managed by private insurance companies.

o Cover is standard in property damage and civil liability insurance policies.
o An extra premium rate is applied to the premium of the standard policy.
o It covers direct material losses (building and content) and personal injury up to a certain amount. Cover depends on the
type of event and on the capacity of the system.

• For the uninsured, managed by the Solidarity Fund Against Catastrophic Events.
o Financed by a tax of 1% on insurance premiums (excluding life insurance).
o Protection includes compensation for bodily injury and an allowance for persons whose principal residence is declared
uninhabitable.

Fire insurance policies may be extended to include coverage of other events and other damage, such as storms, hailstorms, snow
pressure, and lightning strikes that directly damage insured goods, but also damage caused by explosions, electrical damage, terror-
ist attacks, damage due to falling air navigation equipment or aircrafts and damage incurred by (identified) land vehicles.

Optional/ Market Market

Compulsory Standard
Peril additional penetration — penetration —
cover cover
cover commercial lines individual lines
Windstorm ✓ NA NA
Hailstorm ✓ NA NA
Lightning — direct hit ✓ NA NA
Lightning — surge ✓ NA NA
Industrial risks:
90%
River flooding ✓ ✓ 5%
Commercial risks:
20%
Industrial risks:
90%
Overflow of stagnant waters ✓ ✓ 5%
Commercial risks:
20%
Torrential rain ✓ NA NA
Storm surge ✓ NA NA
Industrial risks:
90%
Earthquake ✓ ✓ 5%
Commercial risks:
20%
Snow pressure ✓ NA NA
Avalanche ✓ NA NA
Frost ✓ NA NA
Landslide ✓ NA NA
Subsidence ✓ NA NA
Collapsing sinkhole ✓ NA NA
Volcanic eruption ✓ NA NA
Meteor strike ✓ NA NA
Industrial risks:
90%
Tsunami ✓ ✓ 5%
Commercial risks:
20%
 Property catastrophe insurance

Netherlands

Tariffs are calculated by the insurance companies. A deductible is common in windstorm risk policies and not in other perils. The
standard cover for natcat perils is usually bundled with fire insurance cover. Stand-alone natcat products are not common on the
Dutch market.

Based on the Loss Compensation Act (Wet Tegemoetkoming Schade, WTS), the government largely provides cover for losses caused
by extreme events, including earthquakes and major river floods. The WTS also enables the government to provide compensation for
other uninsured catastrophic losses.

The sales and underwriting processes are handled by insurance agents, banks or brokers. Claims processes are handled by insurance
companies or, in the case of individual lines, by proxy agents.

Commercial lines
Market
Optional/
Peril Compulsory cover Standard cover penetration —
additional cover
commercial lines
Windstorm ✓ 95%
Hailstorm ✓ 95%
Lightning — direct hit ✓ 95%
Lightning — surge ✓ 95%
River flooding
Overflow of stagnant waters ✓ 98%
Torrential rain ✓ 98%
Storm surge
Earthquake
Snow pressure ✓ 98%
Avalanche
Frost ✓ 98%
Landslide
Subsidence
Collapsing sinkhole ✓ 98%
Volcanic eruption
Meteor strike
Tsunami
Drought

1/2
 Individual lines
Market
Standard Optional/
Peril Compulsory cover penetration —
cover additional cover
individual lines
Windstorm ✓ 98%
Hailstorm ✓ 98%
Lightning — direct hit ✓ 98%
Lightning — surge ✓ 98%
River flooding ✓ 0%
Overflow of stagnant waters ✓ 98%
Torrential rain ✓ 98%
Storm surge ✓ 0%
Earthquake
Snow pressure ✓ 98%
Avalanche
Frost ✓ 98%
Landslide
Subsidence
Collapsing sinkhole ✓ 98%
Volcanic eruption
Meteor strike
Tsunami
Drought

2/2
 Property catastrophe insurance

New Zealand
New Zealand is one of the riskiest countries when it comes to earthquakes, as measured by annual expected loss as a proportion of
the size of the economy. Individual cover and commercial cover are organised differently.

Individual lines

Individual insurance is not compulsory, but homeowners with fire insurance are required to pay a levy, which is collected by insurers
on behalf of the Earthquake Commission (EQC). The cover is consequently provided through a public-private-partnership, with the
state meeting first losses up to NZ$150 000 (to be increased to NZ$300 000 from October 2022) for five specified hazards — earth-
quake (including fire following earthquake), tsunami, volcanic eruption, landslip and geothermal causes. Insurers provide cover for all
other perils, except for land damage; the state provides cover for damage to land within eight metres of the residence.

Private insurers manage and settle all claims, acting as an agent for the EQC. There is a high penetration rate and the protection gap
is less than 5%.

Commercial lines

Private insurers provide cover for commercial property. Secondary perils are included in the standard cover, with the exception of
earthquake, which is a separate add-on.

Commercial lines
Market
Compulsory Standard Optional/
Peril penetration —
cover cover additional cover
commercial lines
Windstorm ✓ >90-93%
Hailstorm ✓ >90-93%
Lightning — direct hit
Lightning — surge
River flooding ✓ >90-93%
Overflow of stagnant waters
Torrential rain
Storm surge
Earthquake ✓ 87-90%
Snow pressure
Avalanche
Frost
Landslide ✓ 90-93%
Subsidence
Collapsing sinkhole
Volcanic eruption ✓ >87-90%
Meteor strike
Tsunami ✓ >87-90%
Geothermal ✓ 87-90%
Fire ✓ 92-93%

1/2
 Individual lines
Market
Compulsory Standard Optional/
Peril penetration —
cover cover additional cover
individual lines
Windstorm ✓ >95%
Hailstorm ✓ >95%
Lightning — direct hit ✓ >95%
Lightning — surge ✓ >95%
River flooding ✓ >95%
Overflow of stagnant waters ✓ >95%
Torrential rain ✓ >95%
Storm surge ✓ >95%
Earthquake ✓ >95%
Snow pressure ✓ >95%
Avalanche ✓ >95%
Frost ✓ >95%
Landslide ✓ >95%
Subsidence ✓ >95%
Collapsing sinkhole ✓ >95%
Volcanic eruption ✓ >95%
Meteor strike ✓ >95%
Tsunami ✓ >95%
Geothermal ✓ >95%
Fire ✓ >95%

2/2
 Property catastrophe insurance

Portugal

There are no stand-alone natcat insurance products on the market and cover for natcat perils is usually bundled with standard fire
insurance policies. For apartment buildings, fire insurance is compulsory, thus ensuring there is cover for lightning (direct hit). Cover
for earthquake, tsunami, volcanic eruption and lightning (surge) is optional and can be added to the standard cover.

Tariffs are calculated by the insurance companies (both premiums and deductibles). Deductibles are common for earthquake, tsunami
and volcanic eruption only. The implementation of prevention measures usually lowers the premium.

The sales and underwriting processes are handled by insurers, banks or brokers. Claims are handled by insurers. Individual risk
assessments are common in commercial lines.

There is no public compensation scheme for natcat, but the government can provide ad hoc subsidies for large natcat events.

Optional/ Market Market

Compulsory Standard
Peril additional penetration — penetration —
cover cover
cover commercial lines individual lines
Windstorm ✓ 50% 50%
Hailstorm
Lightning — direct hit ✓1 ✓ 50% 50%
Lightning — surge ✓ <50% <50%
River flooding ✓ 50% 50%
Overflow of stagnant waters ✓ 50% 50%
Torrential rain
Storm surge
Earthquake ✓ 15% 15%
Snow pressure
Avalanche
Frost
Landslide ✓ 50% 50%
Subsidence ✓ 50% 50%
Collapsing sinkhole ✓ 50% 50%
Volcanic eruption ✓ 15% 15%
Meteor strike
Tsunami ✓ 15% 15%
Rockfall ✓ 50% 50%

1 Only compulsory for apartment buildings

 Property catastrophe insurance

Russia

Schemes to provide compensation for damage caused to private homes in the wake of an emergency (including natcat) were first
introduced in 2019 (regional programmes for home insurance). Insurers participate in these programmes on a voluntary basis. Those
participating apply the same rate, depending on the regional programme.

Within the framework of the regional programmes, insurance for the loss or destruction of buildings is compulsory. Some programmes
also cover:

• Damage to houses as a result of a (natural) disaster

• Damage to or destruction (or loss) of houses from any other event

The state and insurers work together to compensate for the damage; the respective shares depend on the risks specified in the re-
gional programmes.

Government officials and expert organisations develop action plans, safety guidelines and declarations for natcat events on the basis
of the expert assessment incorporated in national legislation on emergency situations.
 Property catastrophe insurance

South Africa

Natcat cover is not compulsory and is offered by private insurers. Cover for most perils occurring in South Africa is, however,
integrated in standard commercial and individual insurance policies. For some perils, policyholders can opt for more comprehensive
cover (eg, drought, hailstorm, power surge, landslide, subsidence, collapsing sinkhole).

There is currently no public scheme in place, but the South African Insurance Association (SAIA) is engaging with policymakers and
regulators to explore solutions for very difficult to insure (natcat) risks and the possibility of setting up a public-private partnership.
In view of this, the SAIA is working on a proposal to introduce premium subsidies to encourage insurers to provide cover for these
types of risk.

South Africa established a National Disaster Management Centre in 2002 with the objective of ensuring an integrated and coordinated
system of disaster management. This system places a special emphasis on prevention and mitigation efforts by national, provincial
and municipal authorities, communities and other players.

Optional/ Market Market

Compulsory Standard
Peril additional penetration1 — penetration1 —
cover cover
cover commercial lines individual lines
Windstorm ✓ Very low Very low
Hailstorm ✓ ✓ Very low Very low
Lightning — direct hit ✓ Very low Very low
Lightning — surge ✓ ✓ Very low Very low
(power surge)
River flooding ✓ Very low Very low
(property damage)
Overflow of stagnant waters ✓ Very low Very low
Torrential rain ✓ Very low Very low
Storm surge ✓ Very low Very low
Earthquake ✓ Very low Very low
Snow pressure ✓ Very low Very low
Avalanche
Frost ✓ Very low Very low
(Part of crop insurance
cover – Multi Peril
Comprehensive
Insurance (MPCI))
Landslide ✓ ✓ Very low Very low
Subsidence ✓ ✓ Very low Very low
Collapsing sinkhole ✓ Very low Very low
Volcanic eruption
Meteor strike
Tsunami
Drought ✓ ✓ Very low Very low

1 Penetration rates are defined as written premiums as a percentage of GDP

 Property catastrophe insurance

Spain

The Consorcio de Compensación de Seguros (CCS) covers a large proportion of natcat perils. The standard CCS cover can be
extended, on a voluntary basis, to include property, life or personal accident insurance. Tariffs vary depending on the type and level
of exposure. There are deductibles for property damage (7% of the damage) and business interruption (set in the individual policy),
except for vehicles, houses and community centres.

Private insurers collect the premiums for the CCS and also provide direct cover for certain risks not covered by the CCS (direct effects
of precipitation, including hail, frost, lightning, etc.). Tariffs and deductibles for these perils depend on the company and are therefore
subject to competition.

The CCS works with various stakeholders, including insurers, on risk prevention.

As regards natcat risks for the agricultural, livestock, forestry and aquacultural sector, protection is available through the Agroseguro,
which manages the Combined Agrarian Insurance system. This system covers damage caused by any natcat (including frost,
droughts, and floods) to all agricultural production, including crops and animal livestock. Cover is voluntary and made available
through a public-private co-insurance pool, currently involving 18 insurers.

Companies work together with the CCS in processing claims, assessing losses and paying compensation to policyholders. The
amount paid out is later reimbursed to the companies by the CCS. In the wake of certain events (windstorm/atypical cyclonic storm),
the CCS manages the claims-handling process to speed up compensation.

The Spanish public-private partnership, managed by the CCS, is the oldest example of a natcat scheme. The system includes a state
guarantee in case of catastrophic events exceeding the capacity of the CCS. To date, this has not been called on.

For more information, please visit https://www.consorseguros.es

Market Market
Compulsory Standard Optional
Peril penetration1 — penetration¹ —
cover cover cover
commercial lines individual lines
Windstorm ✓ 100% 100%
Hailstorm ✓ 85% 75-100%
Lightning — direct hit ✓ 85% 75-100%
Lightning — surge ✓ 85% 75-100%
River flooding ✓ 100% 100%
Overflow of stagnant waters ✓ 100% 100%
Torrential rain ✓ 85% 75-100%
Storm surge ✓ 100% 100%
Earthquake ✓ 100% 100%
Snow pressure ✓ 85% 75-100%
Avalanche ✓ 85% 75-100%
Frost ✓ 85% 75-100%
Landslide 2
✓ 100% 100%
Subsidence² ✓ 100% 100%
Collapsing sinkhole ✓ 85% 75-100%
Volcanic eruption ✓ 100% 100%
Meteor strike ✓ 100% 100%
Tsunami ✓ 100% 100%

1 Due to the characteristics of the Spanish market and the role of the CCS, the market penetration rate cannot be measured by risk, but depends on the type
of private insurance product or business line.
2 Landslide and subsidence are not covered, unless they occur simultaneously and are caused by rainfall that resulted in extraordinary flooding in a given area.
 Property catastrophe insurance

Switzerland

Article 33 of the Swiss Insurance Supervision Act stipulates that companies offering fire insurance must include cover for natural
hazards as well. Contents insurance covers the same perils as buildings insurance, but is mostly optional.

The scope of coverage, premium, tariff and rules governing deductibles of natcat insurance in individual lines are set by law. Lake
tsunamis are covered as part of the cover for river flooding and overflow of stagnant waters.

Market Market
Compulsory Standard Optional
Peril penetration — penetration —
cover cover cover
commercial lines individual lines
Windstorm ✓ 99% 99%
Hailstorm ✓ 99% 99%
Lightning — direct hit ✓ 99% 99%
Lightning — surge ✓ 99% 99%
River flooding ✓ 99% 99%
Overflow of stagnant waters ✓ 99% 99%
Torrential rain ✓ 99% 99%
Storm surge
Earthquake ✓ 10% 10%
Snow pressure ✓ 99% 99%
Avalanche ✓ 99% 99%
Frost ✓ 25% 25%
Landslide ✓ 99% 99%
Subsidence ✓ 5% 5%
Collapsing sinkhole ✓ 5% 5%
Volcanic eruption
Meteor strike
Tsunami
Rockfall ✓ 99% 99%
 Property catastrophe insurance

United States

Flooding is the most common and costly natural disaster in the United States, causing billions in economic losses each year. According
to the National Flood Insurance Program (NFIP), 90% of all natural disasters in the United States involve flooding.

The federal government is the primary provider of flood insurance for residential risks, while private insurers provide coverage
for commercial flood insurance risks. There is no coverage for flooding in standard homeowners’ or renters’ policies or in most
commercial property insurance policies. Coverage is available in a separate policy from the NFIP and from a few private insurers.

As a general rule, the natural disaster guarantee is included in the homeowner’s insurance policy. The standard homeowner’s policy
usually only covers damage caused by wind, including tornadoes, cyclones and hurricanes. Homeowners are, however, generally
also protected against fires, storms, wind, wildfire and fire following earthquake.

The US market is governed by the principle of contractual freedom whereby insurance companies have complete freedom to set the
amount of the contribution they deem appropriate.

Market Market
Compulsory Standard Optional
Peril penetration — penetration —
cover cover cover
commercial lines individual lines
Windstorm ✓ NA NA
Hailstorm ✓ NA NA
Lightning — direct hit ✓ NA NA
Lightning — surge ✓ NA NA
River flooding ✓ NA Limited
Overflow of stagnant waters ✓ NA Limited
✓
✓
(due to water Limited optional
Torrential rain (due to rising NA
intrusion caused cover
water)
by damage)
Storm surge ✓ NA Limited
Earthquake ✓ NA Limited
Snow pressure ✓ NA NA
Avalanche ✓ NA NA
Frost ✓ NA NA
Landslide ✓ NA Limited
Subsidence ✓ NA Limited
Collapsing sinkhole ✓ NA Limited
Volcanic eruption ✓ NA Limited
Meteor strike ✓ NA NA
Tsunami ✓ NA Limited
 Property catastrophe insurance

Glossary

Insurance cover
Standard cover The insurance of natcat perils is not compulsory, but cover is automatically integrated in other
insurance products, and may not allow the insured the choice to opt for a personalised bundle of
perils.
Compulsory cover Taking out insurance for a natcat peril is mandatory.
Optional/additional cover Insurance cover is either optional or policyholders can opt for an extension of the standard cover.
Commercial lines Insurance cover below the level of industrial risk, typically for commercial/business entities, includ-
ing small and medium-sized enterprises (SMEs).
Individual lines Insurance cover for individuals for loss or damage, most typically homeowner’s insurance.
Flat cover Only one type of policy exists in the market, with a fixed, predefined list of perils covered.
Tariff/Pricing Pricing is either based on legally set, fixed tariffs or is open to the free market. In both cases, the
premium can be risk-based (including zoning) or cross-subsidised.
General event — limit of In some countries, an overall limit of indemnity for a single event is set by law for the insurance
indemnity industry. Losses greater than the limit are not fully compensated; policyholders only receive a quota
of their claim.
Fixed value A policy that provides a fixed amount of money, regardless of the total cost of the damage, in the
event of a total loss.
Sum insured There is no cap and the total cost of the damage is covered, in the event of total loss.
Reinstatement value (re- The cost of replacing the damaged item is covered regardless of depreciation or appreciation.
placement cost coverage) There is also “extended replacement cost”, in which the pay-out will exceed the coverage limit if
the costs for construction (or replacement) have increased.
—> A TV set costing €2 000 five years ago was destroyed in a flood. TV sets have a typical lifespan of 10 years. A similar
TV set today costs €2 500. The destroyed TV set had 50% (five years) of life remaining. Regardless of the five years of
wear and tear, the insurer will pay the replacement cost of €2 500.
Current value Current value is calculated by subtracting depreciation from the replacement cost. Depreciation
is usually calculated by establishing the lifespan of the item and determining what percentage of
that life remains. This percentage multiplied by the replacement cost equals the current value.
—> A TV set costing €2 000 five years ago was destroyed in a flood. TV sets have a typical lifespan of 10 years. A similar
TV set today costs €2 500. The destroyed TV set had 50% (five years) of life remaining. The current value is €2 500
(replacement cost) x 50% (useful life remaining), or €1 250.
Value of claim The value of claim is the amount determined after a formal request to an insurance company for a
payment based on the terms of the policy. It is paid to the policyholder once approved.
Deductible A deductible is the amount that must be paid by a policyholder before the insurer makes any pay-
ment. It can be a fixed amount (eg, €250), a percentage of the claim (eg, 5%) or a percentage of
the sum insured.
—> The insurance policy has a fixed deductible of €100. The claim is €500. The insurer pays €400 and the policyholder
pays €100.
Franchise The threshold that must be reached before an insurer pays any expenses. It can be paired with a
deductible.
—> The insurance policy has a franchise of €2 000. The claim is €1 950. The insurer pays nothing because the threshold
was not reached. If the claim were €2 200, the insurer would pay for the whole loss, ie €2 200.

Perils
The specific source of loss (such as fire, flood, explosion) covered by the policy.
Typical bundle Natcat perils are often bundled into one or more “packages”.

1/2
Risk assessment (besides zoning)
Individual risk assessment usually implies the collection of risk-relevant data at the location of the damage, analysis of that data,
and an expert or underwriter’s decision as to the terms and conditions of the policy.

Risk prevention
Individual risk prevention Individual risk prevention includes all prevention measures taken on site by a policyholder to
protect their property.
—> Examples include water-tight seals for windows (especially basement and ground floor), stop-log barriers for
doors, back-pressure valves for sewer systems, drainage enlargement, installation of new central heating systems in
the attic instead of the basement, installation of hail-resistant roof shingles, installation of lightning and surge protec-
tion, etc.
Large-scale risk prevention Constructions such as dikes, levees, protective barriers, etc. Usually the responsibility of public
authorities.

Risk areas
Low-risk area The area in a country where the likelihood of natcat losses is the lowest.
High-risk area The area in a country where the likelihood of natcat losses is the highest.
Flat-risk A country does not differentiate between high- and low-risk areas.

2/2