42 years since the earthquake of 1977

There are 42 years since the earthquake of 1977. The effects were damaging: nearly 1,600 people lost lives and about 35,000 homes were completely destroyed.

Romania is one of the most exposed European states to seismic hazard. Nevertheless, our country discloses a major protection deficiency at a time when both compulsory and optional housing insurance are of crucial importance for the financial protection of the population.

Studies [1] show that in the event of an earthquake similar to the one of 1977, approximatively 850,000 homes could be affected, respectively more than 10% of the country’s housing stock. The property damage would be between 3.8 and 6.6 billion Euro, of which the value of the insured housing damage would amount to about 1.5 billion Euro.

Currently, there are only 19% of Romania’ s 8.9 million households who have a mandatory home insurance policies (PAD), and 16% also have an optional insurance policy. Thus, from the total number of all housing in Romania, only 1.67 million are covered by mandatory PAD policies, and 1.48 million have optional insurance.

“Protection There is a major lack of insurance as regards to home insurance, which, in the event of a disaster, can reach even 5 billion euro, a sum representing damages not covered by insurance policies”, said Iulia NICOLA, General Insurance Specialist within UNSAR – The National Association of Insurance and Reinsurance Companies in Romania.

At the end of the third quarter of last year, property insurance, including home insurance, represented 15.2% of the total local insurance market, with gross written premiums of 897.2 million lei [3]. Of this amount, 40.8% is represented by mandatory and optional home insurance policies.

Starting 2010, Romania has a compulsory insurance program against the three major natural hazards – earthquake, floods and landslides – managed by PAID, based on Law no. 260/2008. Thus, it is now required by law that the home owners purchase a PAD policy, whose insured amount is 10,000 euro, respectively 20,000 euro, depending on the type of housing.

The PAD insurance policy is a basic insurance product, having a social character. In order to adequately protect the house, it is advisable that, besides the obligatory PAD, the owners would also close an optional home insurance policy. In this way, customers will benefit – in addition to the basic coverage offered by the mandatory PAD policy – also from protection for a wide range of risks that can significantly affect the houses.

“Therefore, to ensure an adequate home protection, owners are advised to take out all the necessary insurance, namely the obligatory PAD policy and optional home insurance,” said Iulia NICOLA.

In 2018, UNSAR developed in collaboration with IRES a national study regarding the home insurance. The survey showed that 74% of Romanians are interested in home insurance, and 4 out of 5 Romanians know the compulsoriness of the PAD policy.

In order to raise the awareness amongst home-owners regarding the risks they are exposed to, UNSAR runs permanent financial education programs, including through the Asiguropedia.ro platform.

[1] study carried out by AON Benfield, on April 2017. The estimated damage value on the residential segment (houses) depends on the used mathematical formula.

[2] according to the ASF information – Financial Supervisory Authority.

[3] according to the ASF information – Financial Supervisory Authority.

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