Italy Mandates Climate Insurance for Businesses Amid Rising Risks

Starting January 1, 2025, Italian businesses will be legally required to purchase insurance to cover damages from natural disasters such as floods and landslides. This legislation addresses escalating climate risks in a country where flooding poses the greatest danger. Businesses impacted by such events face an increased risk of bankruptcy and a 5% average revenue decline within three years.

The new law obligates insurers to offer policies, supported by a €5 billion reinsurance fund from a state-controlled financial institution. However, concerns linger about the fund’s adequacy in case of major catastrophes and the potential for insurers to withdraw from high-risk areas.

Italy’s climate insurance protection gap—the difference between insured and uninsured losses—stands at 80%, far higher than the U.S.’s 42%. European-wide, the gap is 75%. Efforts to address this include promoting “impact underwriting” with premium discounts for proactive risk mitigation and advocating for catastrophe bonds to distribute risk to private investors.

With climate losses in Europe escalating from €16 billion annually (2010–2019) to €50 billion (2021–2023), experts warn of increasing financial instability if adaptation and insurance measures lag behind the intensifying impacts of extreme weather.

Source: bloomberg