The government has submitted a draft law for public consultation that will foresee mandatory insurance payments from all citizens to cover the cost of rebuilding in the event of another large earthquake, such as the one that killed 51 people in 2019.
On 26 November 2018, a magnitude 6.4 earthquake struck Durres County and Tirana County, killing 51, injuring thousands, damaging some 14,000 buildings, and leaving many thousands more homeless. The damage and cost of rebuilding were estimated at over €1 billion and aid poured in from around the world including rapid response teams, donations of humanitarian assistance, and €1.5 billion from the EU and member states.
Almost four years later, the government proposed a law “On compulsory insurance of housing against earthquakes” to see citizens pay into the National Fund for Earthquakes. The fund will act as an insurance company responsible for premiums, reinsurance, financing, and processing claims.
The Council of Ministers will determine the premium considering matters such as risk and the economy. The Fund will be under the supervision of the Ministry of Finance, will be supervised by a board and will function as a joint stock company.
The draft law also allows the Fund to be managed by a private company such as an insurance or reinsurance company from OECD or EU countries with an A credit quality level.
All residents, including those in apartments, houses, and social housing, will be required to pay the premium, even if they have existing insurance policies with private companies. The draft, however, does foresee the premium being covered by the state for those with low incomes.
The government argues that the law is necessary as Albania ranks first in Europe in the World Bank Disaster Risk Index.
But not everyone is convinced, and the private insurance sector has concerns. Venera Xhillari, deputy general director of Atlantik Insurance, told Monitor that insurance against other risks will be neglected even more as people cannot afford it. This is problematic as people should be covered against all disasters the country is exposed to, including flooding.
“Meanwhile, the largest clients of insurance companies are banks, which provide collateral property insurance for credit purposes. All customers who receive loans are obliged to insure the property against fire and earthquake, where the bank is the beneficiary. According to the draft law, the citizen will pay for two insurance policies for the bank and the state,” she explained.
The draft law does not solve the current problems of high risk of natural disasters and global warming, where our country is among the most vulnerable in the region.” she said.
Xhillari added that Albania is particularly prone to earthquakes, floods, forest fires, storms, landslides, drought and temperature extremes.
“The current exposure to the risks of natural disasters is already affecting the national economic development, public and private, and is also related to the main sectors of the development of the national economy, such as agricultural production. Consequently, it is a matter of development and national security,” she added.
She also said that the law, in its current form, has many technical issues, including risk assessment in buildings that do not meet the technical criteria for insurance.
“The draft law provides for exceptions that will not be subject to the law, but the draft does not have a basis for property valuation.”
(Alice Taylor | Exit.al)
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