Insurance against Natural Hazards: Critical Elements on the Risk Premium Evaluation in the Italian Context

The aim of this paper is to highlight the insurance dynamics in relation to catastrophic events and how the insurance companies approach the insured parties (contractors) for the definition of a tailored insurance policy contract. Within this study the emphasis has been addressed more on the regulatory situation in the Italian context as a key example of the existing contractual problems regarding the drafting of insurance contracts against natural hazards. In particular, the study defines the drawbacks of having information asymmetry between the parties towards several substantial elements of the policy agreement, including the definition of the overall risk, exposure, vulnerability and the consequential insurance premium. This study provides an overview of the possible calculation as a specific one based on the risk / premium assessment tool of the Exceedance Probability curve (EP curve) method used by insurance companies. This method focuses on some of the most important insurance parameters for determining the insurance premium and the possible indemnity in relation to the risk related to natural hazards. In the results and discussion, the research reports on how an information discrepancy on contractual transparency appears evident in fact creating an obstacle to facilitate the access to the data referred to in the risk calculation inherent in the asset and obviating the information discrepancy, allowing the private individual to use the information consciously. With the presentation of a risk calculation tool based on the EP curve and relative loss or exceedance, the study shows a possible correlation between insurance dynamics and the new environmental, social, governance (ESG) parameters for implementation on the financial markets.