by Switzerland sometimes feels like the land of insurance. Numerous costs that are covered by taxes in many places come instead in the form of compulsory insurance in Switzerland. However, some risks remain uncovered by compulsory insurance. Earthquakes are one such risk. This week, a plan to force all property owners to contribute to the cost of earthquake repair received broad support in Bern. © GoranJakus | Dreamstime.comOver the years, Switzerland’s federal government has tried and failed to introduce some kind of country-wide earthquake insurance. Switzerland has fault lines running through it and is at risk of earthquakes. Many other risks to real estate are well covered. Some cantons make insurance for weather and fire damage compulsory. And while earthquake insurance is available
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Switzerland sometimes feels like the land of insurance. Numerous costs that are covered by taxes in many places come instead in the form of compulsory insurance in Switzerland. However, some risks remain uncovered by compulsory insurance. Earthquakes are one such risk. This week, a plan to force all property owners to contribute to the cost of earthquake repair received broad support in Bern.
Over the years, Switzerland’s federal government has tried and failed to introduce some kind of country-wide earthquake insurance. Switzerland has fault lines running through it and is at risk of earthquakes. Many other risks to real estate are well covered. Some cantons make insurance for weather and fire damage compulsory. And while earthquake insurance is available and relatively affordable, it isn’t compulsory and few building owners have it. This leaves the country without a plan to fund the damage an earthquake could bring.
One point of resistance to a nationwide solution is the differences in earthquake risk levels between cantons. Those with lower risk don’t necessarily want to be forced to subsidise those in high risk cantons. In addition, building insurance has traditionally been the business of cantons rather than the federal government in Bern.
The proposed solution doing the rounds in Bern would force home owners to make payments, calculated as a percentage of their insured value of their properties. These payments would be paid into a fund to repair damage in the aftermath of an earthquake. Unlike insurance, they would come in one big hit when needed, rather than in smaller premium payments in advance. The percentage suggested is 0.7% of insured property values. This would bring in an estimated CHF 22 billion.
The idea was broadly welcomed in Bern this week. Most in government agree that the cost of repair to private assets should not be covered by public funds. Ultimately, the cost of such a system would probably end up being borne by the whole population. Owner occupiers might extend their mortgages to cover the payments, increasing the long term cost of their housing. And landlords would likely pass the cost on to renters in the form of higher rents, following any earthquake payment.
At the same time, several cantons are against the idea of the federal government getting involved in what they view as a cantonal matter. The federal government said it has no plans to change the constitution to make earthquake protection the purview of Bern.
Currently, 17 of Switzerland’s 26 cantons voluntarily contribute to an earthquake fund. However, the total maximum pool of funds, at around CHF 2 billion, is small.
Experts estimate an earthquake of the magnitude of the 1356 quake in Basel (6.6) would cause 3,000 deaths and CHF 45 billion of damage to buildings.
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