Croatian insurers are reaping a windfall as residents rush to sign up for protection after two devastating earthquakes last year had them rebuilt without private coverage, the head of the country's trade association said.
After billions of kuna escaped payouts because most property owners did not have earthquake insurance, companies like Croatia Osiguranje dd and Euroherc Osiguranje dd, Allianz SE and Vienna Insurance Group AG have now seen demand for premiums rise after a March earthquake in Zagreb and December 29 further south, said Chairman Robert Vuckovic of the Association of Insurers. In January, coverage is estimated to have doubled from a year earlier. Earthquake damage premiums were up 30% last year, spurred by the March quake. Exact numbers will be released later this month, he said.
Croatia is on the northern edge of the earthquake-prone Mediterranean area that includes Italy, Greece and Turkey, a geological region that experiences tremors almost every day, although most are too mild to be noticed. While decades have passed without major shocks in the former Yugoslav nation, many Croats have opted for earthquake policies, saving the 47 billion kuna ($ 7.5 billion) insurance industry devastating payouts.
“We see a big increase in private policies as a trend for the whole industry,” said Vuckovic, who is also a member of the board of Croatia's Osiguranje, the country's largest insurer, in an interview in Zagreb. "Awareness of the need for earthquake protection has risen sharply, especially after the second earthquake."
The 5.3 on the Richter scale Zagreb Tower, which struck just as the country was closing against COVID-19, left a child dead and damaged 25,000 buildings, many in the 19th-century downtown. It was the worst in the country in 140 years – until the even larger 6.3 magnitude earthquake in an hour's drive in December caused further destruction. The last quake was felt as far as Vienna, Budapest and Rome.
The seismic double whammy raised the risk for many Croats, who have traditionally avoided financial protections from earthquakes due to habit and price, Vuckovic said. Only about a fifth of homeowners had policies against such damage before the March earthquake, he said, with an average per capita insurance premium in Croatia totaling 342 euros ($ 412) in 2019, less than a fifth of the European Union average of 2,170 euros.
The damage from the Zagreb earthquake was estimated last month by the Ministry of Economy at 86 billion kuna ($ 13.7 billion), or about 60% of the country's annual budget of 4.2 million people. Yet only 7,300 insurance claims have been filed and insurers will ultimately have paid about 400 million kuna ($ 63.5 million) in damage, a fraction of the total cost.
The plan is to rebuild Zagreb largely with resources from the state and regional government, aided by € 683.7 million in special EU support. Prime Minister Andrej Plenkovic's government will also finance the full cost of rebuilding the December-shaken region, which is one of the poorest in the country.
With the prospect of more seismic activity, the government plans to retrofit buildings, many of which are built of stone and brick, to make them more resilient. Some commercial banks have already included mandatory earthquake coverage in insurance policies as part of the mortgage approval processes.
"There are a number of cultural and material reasons why people have not bought insurance," said Vuckovic. "Under communism, the expectation was that the state would take care of everything and after the war in the 1990s, many people did not have the money to pay for the insurance. But this is all changing now."
–With the help of Alexander Jones.
Top photo: A view of a damaged building after an earthquake in Petrinja, Croatia, on Tuesday December 29, 2020. Photo credit: AP
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