- Cyclone Harry caused more than €1 bn in damage in Sicily and exposed gaps in Italy’s mandatory natural catastrophe insurance scheme, especially for coastal storm surge losses.
- Many businesses held catastrophe policies, but their cover focused on earthquakes, floods and landslides, leaving cyclone, rough-sea and business interruption losses excluded.
- Italy’s protection gap remains wide, with only €18.7 bn of roughly €101 bn in losses from 2014 to 2025 covered by insurers, raising pressure on regulators, carriers and businesses to match policies with actual climate risks.
Cyclone Harry caused more than €1 bn, or $1.14 bn, in damage along Sicily’s coast and exposed a flaw in Italy’s push to expand mandatory natural catastrophe insurance.
Many businesses held policies. Their cover applied to earthquakes, floods and landslides, but not to cyclone damage or storm surges, the risks that hit them when the storm moved from Messina to Syracuse in January.
Luca Faro, who owns a restaurant in the small port of San Giovanni Li Cuti, told Reuters that a coastal business needs cover against storm surges, not river flooding. His losses reached about €400,000, including damage to windows, roofs and refrigeration equipment, plus two months of lost income. He received €20,000 in state aid and no payment from his insurer, despite holding a mandatory catastrophe policy.
Italy introduced the law last year. It requires businesses to insure assets such as equipment, buildings and land. Companies that opt out risk losing access to disaster relief.
Small and medium-sized companies form much of Italy’s economy. Many have long relied on state support after climate-related disasters, rather than buying broad private cover. That model now looks strained.
Unipol estimates that earthquakes, floods and storms cost the Italian state around €7 bn a year. Public debt is moving toward the highest level in the euro zone, so Rome has less fiscal room to absorb bigger disaster bills.
Sicily’s business association called the financial fallout from Cyclone Harry a paradox. It warned that thousands of firms will receive little or no compensation. Marco Causarano, head of the small business lobby at Confindustria in Catania, said companies are insured on paper, yet lack cover for the actual damage they suffered.
Allianz board member Guenther Thallinger told Reuters that mandatory cover rarely solves the problem by itself. He argued that the debate needs more attention on risk awareness, adaptation and risk avoidance.
Scientists link the storm’s intensity to warmer seas and a wetter atmosphere tied to climate change. Those conditions increased wind strength, rainfall and coastal flooding. On January 20, a buoy between Sicily and Malta recorded a 16.66-metre wave, or 55 feet, the highest ever measured by Italy’s Institute for Environmental Protection and Research, ISPRA.
Five months later, Catania’s seafront still showed the damage. Roads remained broken in places. Beachfront businesses stayed shut across areas that usually draw heavy trade.
The aftermath now risks damaging trust in disaster insurance. That comes as the European Union wants businesses and insurers to absorb a larger share of climate-related losses.
Weather and climate disasters in the EU caused €822 bn in losses from 1980 to 2024, according to Brussels-based think tank Bruegel. A quarter of those losses occurred in the last four years. Only around 25% of disaster losses in Europe carry insurance, the report said, with Italy behind many peers.
Industry Minister Adolfo Urso told ANIA’s annual assembly earlier this month that Italy also needs protection against catastrophic events such as Cyclone Harry, which he said had not been anticipated before. He gave no further detail.
Italy recorded one of the EU’s widest gaps between natural catastrophe risk and insurance cover last year, according to EIOPA, the bloc’s insurance regulator. Analysts expect that protection gap to widen as climate change drives stronger storms and more severe heatwaves across the Mediterranean.
Unipol said Italy recorded about €101 bn in cumulative losses from 2014 to 2025. Insurers covered €18.7 bn. The rest fell on the public sector and private citizens.
Italy’s mandatory natural catastrophe insurance scheme, known as Nat-Cat, aims to narrow that gap. ANIA said only 15% of the country’s 4.5 mn businesses had insurance at the end of 2025, though coverage doubled in less than a year after the new law.
Cyclone Harry now threatens that progress. Paolo Angelini, head of Italian insurance watchdog IVASS, said in June that mandatory insurance marked a major achievement after 30 years of failed attempts. Yet he also warned that the standard contract covers only some risks and excludes others.
A mismatch between the risks companies face and the protection they buy risks weakening confidence in insurance, lowering take-up and making premiums harder to pool.
Sicily’s business lobby says policy terms deepen the problem. Some contracts impose deductibles of up to 15% and exclude business interruption, leaving firms with part of the repair bill and all of the lost revenue.
Companies seeking cover for cyclones, hurricanes, hail, strong winds, storms and other weather events need a separate weather-related events rider. Even that add-on does not cover storm surges or damage caused by rough seas.
