It is proposed that Greece undertakes the establishment of a national earthquake insurance programme for homeowners that will replace the ex post disaster relief by the State when an earthquake occurs. Greece is seismically the most active region in the whole Mediterranean. By employing four different catastrophe models, it has been estimated that the economic loss to the residential stock of a 1-in-200 year event is likely to be greater than 22 billion euros; for a 1-in-100 year event is about 14 billion euros; for an 1-in-25 year event is 5 billion euros; and for a 1-in-5 year event is 1.3 billion euros. This potential loss severity exposes the inherent limitations of the ex post funding approach to natural disasters adopted by successive Greek governments and underscores the urgent need for establishing a National Earthquake Insurance Programme. It is proposed that the earthquake coverage should be compulsory and the management of the insurance programme be based on the principle of a public-private partnership. The objective of the programme would be to provide affordable earthquake insurance, up to a maximum amount, to all homeowners, on the basis of risk-based premiums. A comprehensive and unique data bank of the residential stock in the country has been developed, which will be very useful to the local insurance industry as well as to reinsurers.
PurposeThe present article serves two main goals. First, the proposed scheme for Greece is being involved in a benchmarking analysis. Second, an expansion of previous quantitative models is undertaken in order to estimate risk‐based premiums for the proposed national insurance scheme.Design/methodology/approachThe benchmarking analysis of the proposed scheme is undertaken in comparison to the best practices of the catastrophe insurance systems operating in most member‐states of the EU. Risk modelling is employed to calculate risk‐based premiums.FindingsThe benchmarking analysis leads to conclusions which may be useful for the stage of actual implementation of such a program in Greece. Risk‐based premiums for the proposed national insurance scheme are estimated for all CRESTA zones of the country.Research limitations/implicationsUncertainty of estimated catastrophe losses is a limitation of the research.Practical implicationsThe paper provides a detailed description of the proposed earthquake insurance scheme.Social implicationsThe Greek Government should evaluate the proposal for the establishment of a national insurance program for earthquake damages.Originality/valueThe paper's originality/value consists of the construction of a unique data bank of the residential stock of Greece, and a comprehensive proposal for earthquake insurance, based on the best practices of national Cat insurance schemes.
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