Morocco’s insurance regulator, the Authority for the Control of Insurance and Social Provisions, is considering a mandatory home insurance policy as a proactive measure to alleviate the economic burden of natural disasters.
The authority has invited consulting firms to submit bids by November 20th to conduct a study on the feasibility of making home insurance compulsory.
The real estate sector, which accounts for approximately 5% of Morocco’s GDP, has seen significant growth since 2005. But despite a recent government initiative to boost homeownership, home insurance penetration remains low.
Currently, insurance is only mandatory for homes purchased with a bank loan, leaving a large portion of properties uninsured.
A mandatory insurance policy would provide homeowners with financial protection against natural disasters, fires, theft, and water damage, while also reducing the economic burden on the state.
The study will provide the government with the necessary data to determine whether to proceed with legislation making home insurance mandatory.
While the insurance industry stands to gain from such a measure, the primary goal will be to protect homeowners and reduce the economic impact of natural disasters.
In March 2019, Morocco enacted a decree making natural and human-made disaster insurance compulsory for all its citizens. The decree established a Solidarity Fund Against Catastrophic Events (FSEC) to help those unable to secure the mandatory insurance.
To finance the FSEC, a Solidarity Tax Against Disastrous Events was introduced. This 1% tax is levied on insurance premiums and other contributions, excluding life insurance contracts.
The World Bank supported Morocco’s disaster risk management efforts through a US$275 million Development Policy Loan. This financing aims to enhance the government’s financial capacity to respond to natural disasters over a 15-year period.
Despite these measures, the 2023 earthquake exposed the vulnerabilities of a lack of insurance coverage.
Tens of thousands of homes were damaged, and the government was forced to allocate significant funds for reconstruction.
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