In 2023, the domestic private insurance industry remained robust, supported by the satisfactory performance of the Greek economy.
The insurance companies that operate in Greece continued to demonstrate high capital adequacy, well above the regulatory requirements. In addition, they have well-diversified asset portfolios, which mainly include fixed-income securities. More specifically, their total assets in 2023 amounted to EUR 20.3 billion, a significant part of which consisted of high-rated government and corporate bonds.
The expertise of the domestic insurance industry was instrumental in smoothly tackling the consequences of last year's natural disasters. It is worth noting that insurance companies responded very quickly to Storm Daniel, covering more than EUR 300 million in claims. Reinsurance also played a very important role as a risk mitigation tool, since the assigned part of the above claims exceeded 75%.
Due to its location and geography, Greece faces a higher risk of natural disasters compared with most of the other EU countries. Moreover, exposure to natural disasters is increasing over time, as a consequence of climate change. Against this backdrop, the Greek insurance industry has the financial capacity and the know-how to provide the necessary insurance coverage.
Nevertheless, insurance penetration in Greece is very low. As suggested by historical data, Greece has a significant insurance gap in terms of earthquake and fire risks and a less significant, yet critical, insurance gap in terms of flood and windstorm risks. Indicatively, from 1990 to 2019, only 8% of total losses realised during those years were insured. More specifically, only 9% of losses from fires, 4% from windstorms and 8% from floods and earthquakes were insured.
Extreme natural events have adverse effects on the economy. The direct cost is associated with restoring the damages brought about by natural disasters; given the significant insurance coverage gap in Greece, this cost is mostly borne by the state. Indicatively, in the years 2020 and 2021, the average annual amount for damage restoration allocated by the state was more than EUR 1 billion. This represents about 40% of the annual total revenue from the Unified Property Ownership Tax (ENFIA). There is also an indirect cost, related to the macroeconomic impact due to the disruption of economic activity. Natural disasters can have negative effects on output and inflation, with potential persistent impact, depending on the severity of the disruption and the speed of subsequent economic recovery.
Consumers in Greece are not sufficiently aware of the benefits of insurance, risk levels, the actual price of home insurance and the reliability of insurance companies. According to survey-based evidence, the percentage of the population without any insurance experience in Greece is one of the highest in the EU. Moreover, 57% of Greeks who have home insurance have not bought it on their own initiative but only as a precondition for their mortgage. Greek citizens tend to have a lower perception of the risk associated with natural disasters and seem to prefer small short-term benefits rather than pay for future protection, while, at the same time, they perceive the process of purchasing insurance as quite difficult. In addition, lack of trust in insurance companies is among the highest in the EU, as over 30% of Greek citizens are not willing to buy insurance coverage because they do not trust that insurance companies will honour their obligations. Also, for more than 50% of people who stopped their insurance coverage, the reasons were either that the premiums were too high or that they could no longer afford the premium. These factors weigh negatively on the overall insurance coverage uptake in Greece.
Private insurance can play an important role in mitigating the negative effects of natural disasters across the economy. ?he Bank of Greece stands ready to support all state efforts to develop a comprehensive strategy, in terms of both supply and demand, for the insurance coverage of natural disasters.
BANK OF GREECE 
