Autor: Nadica Jovanovska Boshkovska, PhD
In 2023, natural disasters inflicted an astounding USD 380 billion in global economic loss, yet just USD 118 billion of that was covered by insurance (source: AON). That leaves a sobering 70% protection gap between what was lost and what was financially protected. In Southeast Europe (SEE) especially in the Western Balkans, where catastrophe insurance penetration remains below 1% of GDP this isn’t a distant concern (sources: AON, Europa RE, Statista). It’s an immediate vulnerability.
Countries like North Macedonia, Serbia, Bosnia and Herzegovina, Albania, Kosovo, and Montenegro are increasingly exposed to climate-related hazards: earthquakes, floods, droughts, and extreme storms. These risks are no longer isolated events but part of a growing pattern of disruption. Without strong financial safeguards, the consequences will be long-term and will include lower GDP, rising public debt, business interruption, and population displacement. The region urgently needs a shift from reactive crisis response to a more proactive and systematized resilience model.
A Silent Crisis: What the Protection Gap Means for the Balkans
The “protection gap” refers to the portion of disaster-related losses that go uninsured. When catastrophes strike and there’s no financial mechanism in place, the burden shifts entirely to governments and taxpayers. In the Western Balkans, this gap is alarmingly wide.
Recent data shows the average protection gap in Western Europe across various perils is about 69% (10-year totals (2014-2023), in USD bn and inflated to 2023, source: Sigma 1/2024, SwissRe Institute). But in the Western Balkans, it’s far worse hovering around 91%. For droughts and severe convective storms, the gap reaches nearly 100%. Earthquakes, one of the region’s most devastating threats, remain 95% uninsured. Floods, increasingly frequent in cities like Skopje and Sarajevo, are covered at a mere 16%. The numbers expose a dangerous reality: nine out of ten euros lost in a disaster here are not financially protected (sources: Europa RE, AON).
While countries across the EU still face coverage challenges, they often have national schemes and disaster reserves in place. In contrast, most Western Balkan states rely on slow and inefficient post-disaster budget reallocations, donor aid, or external borrowing. This reactive model prolongs recovery and undermines economic stability.
Recent events underscore the region’s vulnerability to natural catastrophes. In October 2024, Bosnia and Herzegovina experienced its worst flooding in a decade, resulting in 27 fatalities and extensive damage to infrastructure, particularly in towns like Jablanica and Konjic. Neighboring Montenegro also faced severe flooding, with reports of buildings being swept away by torrents of water. Albania was struck by multiple earthquakes in 2024, including a magnitude 4.7 quake near Mamurras in July, highlighting the country’s seismic risk. Croatia, too, experienced significant seismic activity, with a magnitude 4.2 earthquake near Rakovica in May 2024. These incidents highlight the pressing need for proactive disaster risk financing and insurance mechanisms across the Western Balkans.
The Cost of Inaction—and the Value of Prevention
Rather than relying on ad hoc measures, the Balkans need to adopt integrated, pre-arranged risk financing strategies. Insurance is one piece of the puzzle, but so are catastrophe bonds, contingency credit lines, and reserve or solidarity funds. These mechanisms provide predictability, speed, and transparency in crisis response. They also send a strong signal to investors and citizens: this region takes resilience seriously. The government has to consider disaster risk finance as part of their programs, which unfortunately is lacking at the moment.
Crucially, prevention goes beyond finance. Investments in resilient infrastructure, digital risk monitoring, early warning systems, and public education campaigns are just as vital. Awareness remains low—not just among citizens but also within institutions. Insurance is still often perceived as abstract, unnecessary, or even elitist. Changing that narrative is essential, and it starts with financial literacy, accessible products, and trust in the system.
Global Lessons—And Regional Successes to Build On
There is no need for the Balkans to start from scratch. Countries like Turkey have long-established government-backed insurance programs such as TCIP, which covers over 60% of residential buildings against earthquakes, and TARSIM, a public-private scheme offering crop and livestock insurance. Romania’s PAID system mandates basic natural catastrophe coverage for homeowners, ensuring broad inclusion.
Greece offers another relevant example: mandatory catastrophe insurance for businesses, which ensures that commercial properties maintain a minimum level of protection against seismic and weather-related events—an approach that could be adapted across the Western Balkans to boost private sector resilience.
Elsewhere, regional risk pools like CCRIF in the Caribbean or ARC in Africa provide rapid payouts after major events—models the Western Balkans could replicate. Even within Europe, hybrid approaches work: the UK’s Flood Re and Spain’s Consorcio de Compensación de Seguros blend public mandates with private delivery, maintaining affordability while ensuring sustainability.
Designing the Right Model for the Balkans
There is no one-size-fits-all solution. However, several policy levers can be tailored to national contexts. Participation in insurance programs could be voluntary or mandatory, depending on the level of public risk. Target groups might include homeowners, businesses, public infrastructure, or the agricultural sector. Governance models could range from fully public to public-private partnerships (PPPs) or regulated private schemes.
Premium subsidies can be universal or targeted especially for vulnerable populations. Mechanisms may be indemnity-based (linked to actual losses), parametric (triggered by measurable events), or hybrid. Coverage can be standalone or embedded, for example, tied to mortgage agreements, utility bills, or social protection programs. Importantly, these schemes must be supported by robust legal frameworks and institutional capacity.
A Role for Business—and for Everyone
Often, disaster risk finance is framed as a government issue. But businesses across the Balkans have a clear stake in this conversation. Agribusinesses face increasing drought and flood risk. Manufacturers are vulnerable to supply chain disruptions. Tourism operators may lose critical infrastructure—and reputation. SMEs, which form the backbone of Balkan economies, often lack the liquidity to survive even moderate shocks.
The private sector must act by reviewing insurance coverage, joining pilot schemes, partnering with governments, and integrating risk finance into continuity planning. Building resilience isn’t just responsible, it’s a competitive advantage.
A Regional Imperative for Resilience
The growing financial toll of climate change cannot be ignored. The Western Balkans remain 91% financially unprotected against disaster risks. This is not sustainable. But the solutions are within reach.
Regional coordination, domestic leadership, and support from development partners can make a difference. Financial preparedness must become a pillar of national resilience strategies—not a footnote. Whether you’re a policymaker in Podgorica, a vineyard owner in Kavadarci, or a reinsurer in Zurich, the message is clear: the time to close the protection gap is now.
Because in an era of escalating climate risks, resilience isn’t a luxury, it’s the smartest investment a country can make.
