INTEGRATING STORM COVERAGE IN THE MANAGEMENT OF HOUSEHOLDING INSURANCE IN ROMANIA

This study relies on the information regarding the predictable evolution of a natural phenomenon, i.e., the storm, in the context of the climate changes we are witnessing. This evolution triggers the need for a new approach with regards to the insurance coverage against this risk in Romania. The main challenge in shifting perspective on the coverage of this risk resides in the fact that no suitable database that can be used for storm modeling purposes in insurance has been built so far. The authors advocate the opportunity of including the storm risk among the risks covered by the mandatory householding insurance in Romania. To this end, a model has been built, in keeping with the solvency II framework that the European Insurance and Occupational Pensions Authority (EIOPA) has already applied in certain states in the same geographical area. The model allows for the estimation of the probable maximum loss (PML) for the mandatory homeowners’ insurance portfolio of the company managing this type of insurance in Romania, but also for the entire housing stock.