Gap in Property and Risk Insurance for Businesses

Only 25% of losses related to climate disasters in the EU are insured, leaving businesses at risk of severe financial losses. The lack of insurance protection is even greater in the Western Balkans, where only 15% of losses from climate disasters are insured.

Property Insurance and Climate Risks
in the EU and Serbia

Property insurance is a fundamentally important investment for any business, but in the EU, the Western Balkans and Serbia, many companies are insufficiently insured or uninsured. This is particularly concerning in light of the increasing frequency and severity of climate disasters. According to the European Central Bank, the gap in insurance for climate disasters in the EU is significant, as only a quarter of losses from climate disasters are insured, and in some countries, this figure is less than 5%. This means that a remarkable part of the potential economic losses caused by climate disasters are borne by companies and individuals, not insurance companies.
Statistics from the European Environment Agency (EEA) show the gap between insured and uninsured commercial properties over the last five years:

RegionTotal climate disasters damage (Billon EUR)Insured losses (Billion EUR)Uninsured losses (Billion EUR)
Western Balkans1,50,21,3

The gap in insurance protection is much larger in the Western Balkans than in the EU. This is due to several factors, including the relatively low level of economic development in the region, the lack of insurance habits and awareness of the risks posed by climate disasters, and the relatively high perceived prices of insurance premiums compared to the financial strength of companies. Uninsured losses can have a significant impact on financial stability and capability to operate, as uninsured or underinsured businesses may not be able to recover from a disaster, which could result in disruption or permanent business interruption.

Insurance as an Element of Overall Risk Reduction

In addition to refocusing on understanding insurance and changing its perspective from cost to an investment perspective, there are several steps companies can take to reduce their asset risk exposure. They include:

  • Implementation of risk reduction measures. This may include installing flood and storm defences or fire suppression systems.
  • Investing in business continuity plans. This may include a plan for running the business in the event of a major disruption, such as a power outage or natural disaster.

Additional Insights

A solid commercial property insurance policy should cover the following:

  • All assets of your company: this includes your business facilities, inventory, equipment, and any other property essential to your business.
  • A wide range of risks: a good property insurance policy should cover a wide array of risks, including fire, flood, storm, hail, vandalism and theft. It is also important to take into consideration any specific risks the business may face, such as cyberattacks or earthquakes.
  • Adequate coverage limits: coverage limits of a property insurance policy should be sufficient to cover replacement or repair costs.
  • Reasonable deductible: the deductible is the amount of money to be paid by the insured before the insurance company starts paying for the covered loss. It is important to choose a deductible that a business can afford.

In addition to the above, many other factors should be taken into account when choosing a property insurance policy for a business, such as:

  • Financial strength and reputation of the insurance company: you should choose an insurance company with a good financial rating and reputation, which brings additional assurance that the insurance company will be able to pay claims.
  • Policy price: it is important to compare the offers of several insurance companies before selecting a policy. However, you must make sure you don’t sacrifice coverage for a lower price.

You should also regularly review your property insurance policy to make sure it still meets your needs. Your business may change over time, and your insurance policy should reflect those changes.

A few additional tips for choosing a solid property insurance policy for your business include:

  • Cooperating with a broker: a broker can help you compare offers from several insurance companies and choose the right policy for your needs.
  • Read the fine print: it is important that you read all the elements of a policy before signing it. This will help you understand the coverage limits, exclusions and other important details of the policy.
  • Ask questions: if you have any questions about your policy, be sure to ask your insurance agent or broker. They’re here to help you understand the policy and make sure you’re getting the coverage you need.