Floods in Tunisia, Insuring the risks of natural disasters in the Maghreb

In November 2001, the floods which badly hit Algeria registered 800 human losses and millions of dollars in material damage for the city of Algiers alone.

In November 2002, floods submerged the regions of Mohammedia and Settat in Morocco.

Finally on September 17-18 and September 24 2003, it was the turn of Tunisia to fall prey to the most devastating floods in decades. The floods paralyzed Tunis and its surroundings and caused important damages to its infrastructure and dwellings.

For a long time, Maghrebian insurers have considered disaster risks as uninsurable, and this for three main reasons:

First, the lack of adequate resources to face substantial cumulative risks, all the more so since reinsurance companies have balked at assuming risks and have imposed their conditions: rates, follow-ups, statistics, …

Second, the absence of choice concerning disaster risk policies: only the most exposed moral or physical persons can receive coverage.

Third, the difficulty to set a price for that particular risk category.

Since insurance and reinsurance companies lack the funds or the means to establish an extensive mutual system of homogeneous risks with a wide spectrum, the solution rests with the state, the only institution with the statutory instruments available to guarantee the insurability of risks. The state can intervene on two levels:

• to generalize disaster risk coverage by extending guarantees to base premiums and introducing mandatory coverage,
• to create compensation mechanisms and regulatory agencies.