Could Swiss insurers cancel policies, as is happening in California?

Telegiornale 14.01.2025, 20:00

In California, where fire warnings now affect 13 million people, wildfires have become a constant threat, exacerbated by climate change. Over the past five years, nearly three million fire insurance policies have been cancelled as insurers deem the risks too frequent and severe.

In Switzerland, such a scenario is impossible. Policies covering natural damage are legally required to include fire coverage, and insurers cannot cancel them even if they wish to. “An insurance company cannot withdraw, even if it wants to,” says Eduard Held, director of the Natural Damage Pool at the Swiss Insurance Association, in an interview with Newswire.

While damage claims in Switzerland have risen, Held attributes this mainly to increased insured values, noting that “the effects of climate change are not yet clearly visible in the statistics”.

Switzerland’s complex insurance system

Switzerland’s insurance system varies by canton but can be summarised as follows: for tenants, household insurance – covering fire, natural damage, and theft – is optional in most cantons. Homeowners, however, must take out either cantonal or private insurance against fire and natural disasters, such as storms, hail, floods and landslides.

This system ensures that 95% of Swiss properties are insured. However, seven cantons, including Ticino, offer more freedom of choice. The others are Geneva, Uri, Schwyz, Appenzell Inner Rhodes, Valais and Obwalden. In these cantons, insurance against fire or natural hazards is not mandatory, explains Held.

Does this make Ticino riskier?

“I would say not,” Held says, pointing out that insurance penetration in Ticino is still very high, exceeding 90%. The system, based on solidarity between those in lower-risk areas and those in higher-risk zones, appears to function well. Held cites the violent hailstorm that struck the Locarno region in August 2023 as a case in point: despite its exceptional severity, the insurance system “passed the test”.

The challenge of earthquake coverage

While the Swiss system is robust in covering many natural hazards, earthquake coverage remains a significant gap, with only 15% of buildings insured. To address this, the government has proposed measures that have met resistance from insurers, leaving the issue unresolved for now.

For Switzerland, the current insurance framework demonstrates resilience, even in the face of increasingly severe weather events. However, challenges such as earthquake coverage highlight areas for improvement as the country prepares for future risks.

Translated from Italian using DeepL/amva/ts