Lack of provision for parametrics in Italian catastrophe scheme disappoints insurer Revo

By Henry Gale

April 23 - (The Insurer) - Specialty insurer Revo has expressed disappointment at the lack of provision for parametric policies within Italy's new compulsory catastrophe insurance scheme in its annual report.

The Italian government has introduced a requirement for businesses to hold coverage for earthquake, landslide and flood risks. The regulation comes into force this year. The deadline for large companies to comply is June 30, while medium-sized and small firms have until October 1 and December 31 respectively.

"It is a pity that the decree did not provide for the possibility of using stand-alone parametric cover," Revo Insurance stated in its annual report, released earlier this week. Revo, previously known as Elba Assicurazioni, was acquired in 2021 by a special-purpose acquisition company that planned to make it a leader in parametric and specialty insurance covers for small and medium-sized businesses.

It does not appear that businesses would be able to meet the catastrophe insurance requirements by purchasing parametric covers alone. The text of the government decree specifies that the compulsory coverage must compensate for damage to a businesses' property caused by a catastrophe.

While parametric insurance is often used to cover property damage, it does not directly compensate for physical losses. Instead, pre-agreed claim amounts are paid based on the occurrence of a predefined event, such as an earthquake of a certain magnitude occurring in a given area.

Revo, like other Italian property and casualty insurers, is required to offer compliant catastrophe insurance policies to businesses while it has available capacity. For additional premium, it is also offering parametric add-ons to provide businesses with fast payouts after a qualifying earthquake or flood.

Flooding events in recent years have driven increased demand for parametric covers in Italy, Liberty Mutual Re senior underwriter Charlotte Belin told Parametric Insurer last month.

Speaking before the eligibility of parametric covers was clarified, Belin said: "A large amount of capacity will be needed if all businesses must access catastrophe insurance, and traditional catastrophe capacity might be limited. Parametric as alternative risk transfer is a viable method of complementing traditional capacity."