In Full: Underinsurance limits Italian quake exposure
Insured losses from the earthquake that struck central Italy last week (24 August) are expected to be limited, with low insurance penetration and government funding restricting (re)insurers' exposure...
Few loss estimates have been released for the magnitude 6.2 quake, which killed hundreds of people and levelled several Umbrian towns near the epicentre, including Amatrice.
On Friday (26 August), Fitch estimated insured losses from the event of EUR100mn-EUR200mn ($113mn-$226mn), with payouts likely to arise from property lines. Reinsurers are more likely to bear the brunt of the losses, taking on between EUR60mn and EUR120mn, while primary carriers could face claims of between EUR40mn and EUR80mn.
Last week's earthquake was very similar to the magnitude 6.3 quake that struck the same region in 2009. The event generated just $560mn in insured losses, despite economic losses reaching some EUR3bn, according to data from Aon Benfield's Impact Forecasting.
Similarly, the pair of quakes which hit the Emilia-Romagna region three years later resulted in payouts worth only 10 percent of the estimated $16bn economic loss burden, according to Munich Re's NatCatService.
Based on Italian P&C market share and previous Italian quake loss experience,The Insurance Insider has compiled a read-across table providing rough estimates of expected losses for the top 10 underwriting entities in the market.
Domestic insurer UnipolSai heads the table, with its 22 percent market share resulting in an estimated $122.9mn hit, based on industry losses incurred in the 2009 quake. This loss figure would equate to 1.83 percent of Q2 shareholders' equity at UnipolSai.
When adjusting the industry loss for the top end of Fitch's EUR100mn-EUR200mn estimate, the carrier would incur a loss of just $49.6mn.
Generali would also take one of the biggest hits from the event. Two of its underwriting entities feature in the top 10 - Generali Italia and Assicurazioni Generali.
When combined, the Generali group would incur a loss of $118.9mn, or a hit to Q2 shareholders' equity of 0.38 percent, based on 2009 quake industry losses.
The Italian subsidiaries of Allianz and Axa, third and fourth in the market respectively, would also incur negligible losses for their global insurer parents.
Allianz's market share of 12.5 percent would roughly equate to a loss of $70.1mn based on 2009 loss experience, or just $28.3mn based on Fitch's top-end estimate. Axa, meanwhile, would incur less than half of what Allianz would take on in both instances.
Carriers have a limited exposure to Italian earthquake risk due to underinsurance and post-disaster government funding.
The declaration of a state of emergency in the region would mean certain losses would be covered by an Italian state fund, limiting insurers' exposure to the event.
Italy also has one of the lowest property insurance penetrations among earthquake-exposed countries.
According to data from Swiss Re, Italy's property insurance penetration is just 0.36 percent, only ahead of Mexico and Turkey.
Italian earthquake insurance penetration is lower, at 0.07 percent for commercial properties, and 0.01 percent for residential.
This compares to 0.22 percent and 0.15 percent respectively in New Zealand, the country with the highest earthquake insurance penetration.
Visit the Insurance Insider