Following approval by the Majlis and Guardian Council, the long-awaited Natural Disaster Insurance Fund will be established in the next fiscal year. It will cover homes against all natural disasters, president of the Central Insurance company of Iran said.
"As per law the Ministry of Economy and the CII are defining the regulatory framework of the fund," Gholamreza Soleimani told IRIB.
Homes subscribed to the national power grid will be covered by the fund, he said, "Owners of housing units will pay half the premium and the other half will be paid by the government."
According to the provisions of law, the CII is in charge of assessing risks and setting premium rates subject to the geography of the residential areas.
Coverage will include all the natural disasters across the country, he said. "In the first phase it will only cover homes but will be expanded gradually to other types of property."
The official said as buying insurance is optional, people rarely are interested in earthquake insurance. Of the 20 million residential units barely 20% are insured against natural disasters, according to the Disaster Management Organization.
Iran has suffered from 125 natural disasters in the past 25 years, resulting in 73,000 deaths, 145,000 injuries and harmed 41 million lives. The calamities spread death and destruction far and wide and cost $20 billion, according to CII data.
An IMF report on "Macroeconomic Outcomes in Disaster-Prone Countries" published in October 2019 categorized Iran among the first quartile (0%-25%) of the annual probability distribution of natural disasters in non-disaster-prone countries.
Iran’s economic cost of natural disasters was equivalent to 0.27% on average and a maximum of 2.9% of the country’s GDP during 1998-2017.
The macroeconomic impact of natural disasters has three stages. The first involves direct loss from the destruction of infrastructure and property, the second is indirect loss accumulated from foregone output and income plus costs incurred as individuals and businesses work around the disruptions.
Finally, as the recovery starts, rebuilding of infrastructure and replacement of damaged goods leads to a temporary boost in activity and employment in the affected area. It also gives rise to opportunities to upgrade infrastructure.
