Initiative to introduce mandatory insurance against floods, landslides, earthquakes, and storms

SARAJEVO, (Patria) - Due to the absence of a comprehensive natural disaster insurance mechanism, after the 2014 floods, only 14.9 percent of the total estimated losses and damages in BiH were covered from all sources of funding.  

Of this, less than one percent was covered by budget reserves, and less than two percent by insurance, while most losses were never compensated.

As natural disasters are becoming more frequent, as part of the UNDP project activities "Integrating climate change into flood risk reduction in the Vrbas river basin", a proposal for a new property insurance product against damages caused by natural disasters due to climate change has been created. 

"There is a great need, but also potential for developing an insurance package for a larger number of natural disaster risks. To achieve this, it is necessary to amend the legal framework and conduct a promotional campaign to raise awareness about the role of insurance in managing natural disaster risks," stated Raduška Cupać, UNDP Project Manager, UNDP announced.

Within the round table "Possible insurance models for managing natural disaster risks with a special emphasis on floods" organized in Sarajevo and Banja Luka, UNDP presented a mandatory insurance product for individual residential buildings for the most common types of disasters. The goal is to launch an initiative to introduce mandatory property insurance against natural disasters.

On this occasion, Božana Šljivar, Head of the Finance Department of the City Administration of Banja Luka, stated that "A systemic approach needs to be ensured, following the example of some other countries, through a model of mandatory insurance against floods and other natural disasters. This is a realistic and long-term good solution for the complex problem of risk management and compensation for damages from floods and other natural disasters. This provides the population with adequate protection against these types of risks, and at the same time protects budgets at all levels of government from unforeseen expenses in the event of catastrophic events.".

Natural disasters that would be included in the insurance product "package" are floods, landslides, earthquakes, and storms, and accordingly, it is also necessary to establish a legal obligation for owners to insure their residential buildings in this way.

Snježana Rudić, Assistant Minister of Finance of Republika Srpska, stated that the Ministry of Finance is aware that there is a need to raise awareness not only about the necessity but also about the individual and public benefits of this type of insurance, and further analyses are ahead of us regarding the possibilities of systematically directing insurance users and insurance companies. 

"We expect that insurance companies operating in Republika Srpska will carefully analyze the results obtained within the Project, in the hope that they will recognize new business opportunities in this area, which, adequately designed, could also be supported by measures of the Government of Republika Srpska," Rudić conveyed.

The Secretary General of the Association of Insurance Companies in the Federation of BiH, Ermin Čengić, emphasizes: "The next step is to submit this initiative for the creation of the Law on Mandatory Insurance of Property against Catastrophic Damages to the competent institutions.".

All relevant representatives of the insurance sector from Republika Srpska and the Federation of BiH attended the round tables, including the Ministries of Finance, Ministries of Water Management, the Insurance Supervision Agency, insurance companies, municipalities, etc.

The UNDP project "Integrating climate change into flood risk reduction in the Vrbas river basin" is financed by the Global Environment Facility and is being implemented in cooperation with the Ministry of Foreign Trade and Economic Relations of BiH, the Ministry of Spatial Planning, Construction and Ecology of RS, entity ministries responsible for water management and civil protection, and 14 municipalities in the Vrbas river basin.