Insurance policies must be executed by December 31, 2024, and events to be insured include earthquakes, floods, landslides, floods, and overflows. This regulation applies to companies that indicate in their balance sheet real estate (land and buildings), plant and machinery, industrial and commercial equipment on the Italian territory (assets and goods that shall be covered by the insurance) and does not apply to farms.
With Law no. 213 of 30 December 2023, companies with a registered office in Italy or abroad but with a permanent establishment (branches) in Italy compelled to register in the Register of Enterprises, are required to stipulate – by 31 December 2024 – insurance contracts to cover damage to real estate (land and buildings), plant and machinery, industrial and commercial equipment (the obligation is triggered for companies that indicate the assets in their balance sheet pursuant to art. 2424 of the Italian Civil Code, paragraph 1, Assets section, item B-II, 1), 2) and 3) directly caused by natural disasters and catastrophic events occurring on the national territory which include earthquakes, floods, landslides, and overflows.
Such obligation does not apply to companies carrying out agricultural activities (farms) pursuant to Art. 2135 of the Italian Civil Code and for which the provisions of the National Mutual Fund continue to apply for the coverage of catastrophic weather and climate damage to agricultural production caused by flood, ice or frost and drought, managed by ISMEA – Institute of Services for the Agricultural and Food Market.
This obligation is also relevant for the purposes of the allocation of contributions, subsidies or facilities of a financial nature from public resources, also with reference to those provided for in the event of natural disasters and catastrophes (Article 1, paragraph 102 provides, in fact, that the fulfillment must be taken into account during their allocation).
Insurers can decide to take on the entire risk directly, or to assume it in co-insurance form, either in consortium form through a number of insurers (provided that the consortium is registered and approved, in terms of stability, by IVASS – the Institute for the Supervision of Insurances. In any case, any overdraft or deductible may not exceed 15 per cent of the damage and must provide for the application of premiums proportional to the risk (Article 1, paragraphs 103 and 104).
By means of a decree, the MEF (Ministry of Economy and Finance) and MIMI (Ministry of Enterprise and Made in Italy), may establish further implementation and operational methods, insurance schemes, methods for the identification of calamitous events and catastrophes that are susceptible to compensation, as well as to determine and periodically adjust premiums. They will also take into account the principle of mutuality and, having consulted IVASS, the methods of coordination with respect to the current acts of regulation and prudential supervision in the field of insurance, also with reference to the limits of risk-taking capacity of companies or the consortium , as well as updating the values of the overdraft/deductible.
The obligation to insure does not apply to companies whose immovable property is encumbered by building abuse or built without the required permits, or encumbered by abuse arising after the date of construction.
Refusal or circumvention of the obligation to contract by insurers, even at the time of renewal, is punished with an administrative fine ranging from € 100,000 to € 500,000 imposed by Ivass.
Finally, the law provides that SACE S.p.A. – an insurance and financial company controlled by the MEF – is authorised to grant private market insurers and reinsurers, at market conditions, by means of a special agreement approved by the MEF and MIMI with the aforementioned decree, coverage of up to 50 per cent of the indemnities to which they are required in the event of the occurrence of the damage events deducted in the contract (up to a limit of €5 billion per year, in 2024, 2025 and 2026) with a State guarantee on first demand and without recourse. The State guarantee is explicit, unconditional and irrevocable.
DISCLAIMER: This article merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi which assumes no liability whatsoever for the content and correctness of the newsletter. The author or your contact in the firm will be happy to answer any questions you may have.