ROME: Italian cedants could increase as insurers benefit from the new taxation regime, which gives catastrophe insurers premium exemption from the 22.5% insurance premium tax and makes 19% of premium tax-deductible. Fitch Ratings said the changes to the tax regime will offer new incentives for customers in Italy to include natural catastrophe cover when they buy home insurance and are thus a small credit positive for the country’s non-life insurers. Italian insurers could get a boost in business as more customers choose cover for natural catastrophe losses, such as flood and earthquake. This could help to partially offset weak profitability in the bulk of their business the motor insurance market. However, Fitch said the impact of the tax regime will likely be small on the overall re/insurance market; “Italy’s national association of insurers expects the number of people buying cover to grow by 20% a year over the next five years, but natural catastrophe premiums represent less than 1% of the home insurance market and the proportion would still be very low even with that level of growth. Moreover, we expect insurers to cede more than half of the extra risk to reinsurers to shield themselves from large losses, meaning that much of the earnings boost will be spent on reinsurance. Insured losses from recent natural catastrophes in Italy have been split about 60/40 between reinsurers and primary insurers.”Recent years have increasingly exposed Italy’s protection gap; the world’s 5th biggest economy is still vastly underinsured to cover the natural disaster risks it faces, just 2% of Italian homes have flood and earthquake insurance.
The Italian Civil Protection Agency estimated the economic losses from the 2016 October earthquake series at $19.5 billion.