Economy, Business And Markets
0

Disaster Insurance Needs Reinvention

Disaster Insurance Needs ReinventionDisaster Insurance Needs Reinvention

The vice president of the Central Insurance company of Iran has detailed the performance of the insurance industry in addressing natural disasters.

“Facing danger from almost 30 types of natural disasters, Iran is the sixth hazardous country in the world and thus a new approach is essential for handling such risks,” CII public relations office quoted Parviz Khosroshahi as saying during the Third National Conference on Disaster Management.

The nation has suffered from 125 cases of natural disasters over the past 25 years, resulting in 73,000 fatalities, 145,000 injuries, and more than 41 million lives affected, he said.

“Total loss amounts to almost $20 billion. Insurers will not be able to cover such massive loss; the state, people and insurers should prepare against such disasters.”

However, Khosroshahi noted that insurance companies could play a key role in curbing the losses before disasters strike.

“Insurers’ first measure for preventing huge losses is lowering the risks, which means high-quality constructions and buildings resistant to natural disasters,” he said.

 Sub-Sectors

The official noted that helping insurance companies increase their capital adequacy would encourage them to improve their disaster coverage sectors; however, imposing high taxes and fees on insurance companies in recent years have created new hurdles for the insurance firms.

“Mandatory property insurance will automatically push low quality buildings out of the market, as builders would have to raise construction standards or they would face higher premiums which of course they would not be able to afford.”

Khosroshahi pointed to “construction deficiency insurance”, developed by the CII in 2007, and said that such policies require insurers to cover losses caused by faulty construction of buildings while the insured can include natural disasters coverage in their policies.

“Insurers’ total earnings from these policies amounted to 83 billion rials ($2.74 million at the official exchange rate) in 2014, and this figure could likely increase in the future.”

Insurance firms sold 2.3 million fire insurance policies in 2008 with the number remaining flat throughout 2014. However, close to 90% of homes in the country still lack natural disaster insurance.   

Financialtribune.com