Attempts to Close the Protection Gap: Preliminary Evaluation of Italy's Compulsory Disaster Insurance Reform for Firms

The present study investigates the firm-level impacts of Italy’s recently enacted compulsory insurance law for natural disasters (Law No. 213 of December 30, 2023), with a focus on flood risk. By disaggregating firm data and classifying it by sector, the study compares the number of insured firms with catastrophic (natural hazard) insurance and the total value of insured assets before and after the policy was implemented. Before the reform, the data reveal a market structure in which insurance coverage was held mainly by larger firms, with most SMEs remaining uninsured. The post-policy scenario indicates a substantial structural shift, with near-universal insurance penetration expected among SMEs and a significant expansion in the total insured asset base, despite insured firms increasing at a much faster rate than insured values.

This study also analyzes the various insured values of assets by sector, firm size, and flood hazard zones throughout Italy. Using flood hazard maps, a spatial analysis highlights approximately 1.13 million firms located in areas with varying levels of flood risk. These findings provide a preliminary overview of the expected changes in insurance penetration and geographic exposure resulting from the reform. However, a comprehensive assessment of the reform’s effectiveness in enhancing resilience and reducing risk remains a complex and ongoing challenge that requires further empirical investigation.