The Portuguese parliament has today approved a recommendation to the government for the creation of a Guarantee Fund for Climate and Seismic Risks.
The text was approved with votes in favour by the PS – Socialists (who proposed the initiative), PSD – social democrats, the BE – Left Bloc and the PAN – people, animals, nature. Right wing CHEGA, the Liberal Initiative and the PCP – communists abstained.
In the resolution, Socialist MPs argue that the heavy rains last Autumn, which caused flooding in several Portuguese cities, exposed “the lack of cover that most consumers have against climatic risks”.
“Data advanced by the Portuguese Insurers Association (APS) regarding compensation paid by insurance companies following floods that hit the Lisbon indicate that only 10% to 15% of losses are effectively covered by policies that include natural phenomena. Compensation owed by insurers following these floods is already estimated at around €17 million, which leaves to the imagination the true impact of this occurrence,” reads the document .
On the other hand, seismic risks have been pointed out repeatedly as the most serious for Portugal, with estimates from the Portuguese Association of Insurers (APS) suggesting that an earthquake with the characteristics of the Great Earthquake of 1755 (8.75 magnitude on the Richter scale) could result in economic losses of 20% of Gross Domestic Product (GDP).
The creation and regulation of a Guarantee Fund for Climate and Seismic Risks is thus suggested, “nsuring the payment of compensation for damages resulting from extreme climate phenomena”, in coordination with the Insurance Supervisory Authority, ASF, and “in accordance” with work being done at the European Union level.
“The European Commission, within the scope of the implementation of the strategy for adaptation to climate change, is carrying out measures foreseen therein that may help Portugal define strategies to increase the level of climate risk insurance coverage,” the text continues.
Back in 2010, ASF proposed a model for an earthquake fund based on the sharing of responsibilities between various players in the system: the franchise borne by the insured, the participation of subscribing insurance companies, including the resources accumulated on their behalf in the earthquake fund, the intervention of the earthquake fund, including reinsurance capacity contracted with other insurance or reinsurance companies, the level of risk that benefits from a State guarantee, as the reinsurer of last resort.
The association has advocated mandatory inclusion of earthquake coverage in fire and multi-risk insurance, the distribution of risk between insured parties, insurers and reinsurers, the accumulation and capitalisation of economic resources through funds and the support and guarantee of the State.