Government compensation could discourage people from obtaining insurance, association says.

The dramatic Salina fireworks factory explosion caused €1.4 million in insured damage, but the total cost is believed to be much higher because many impacted properties were uninsured.

On June 1, a series of blasts at the Lourdes fireworks factory damaged homes, farms and businesses nearby. The blast shattered windows, blew in doors, damaged vehicles and killed livestock.

More than a month after the explosion, insurers have received just under 300 claims, according to Malta Insurance Association director general Adrian Galea.

Most of the claims, 184, were made under home insurance policies. A further 56 were linked to damage to property, and 37 came from commercial policies. Insurers also received 12 motor claims, three involving yachts and one linked to agriculture.

Galea said the number of claims was lower than the association had expected, and said it reflected what he described as a disinterested attitude towards insuring property and possessions.

“We were expecting many more claims, but in reality, it shows that unfortunately many people decide to take a chance and go without insurance,” he told Times of Malta.

Home insurance is generally required when a property is bought through a home loan. Once the loan is repaid, owners can choose whether to keep the policy. A 2021 Malta Financial Services Authority survey found that almost one in four respondents had never bought home insurance.

We were expecting many more claims, but in reality, it shows that unfortunately many people decide to take a chance and go without insurance

“Even though insurance is an expense, it is there to protect you from the unexpected,” Galea said.

“Once the unexpected does happen, there is a way to protect yourself, your family and your loved ones financially and to help you get back on your feet.”

Galea said several uninsured residents contacted companies after the blast to ask whether they could receive compensation.

Some, he said, also tried to find out which company insured the fireworks factory.

“Many called to see whether they would be able to claim damages against the factory or how they could be compensated for their expenses since they were not insured,” he said. 

This was before news broke out that the Salina fireworks factory was operating without insurance.

Government support raises concerns

Following the explosion, Prime Minister Robert Abela said the government was assessing the situation and considering ways to support affected families.

Times of Malta earlier reported that the government was awaiting the conclusion of the magisterial inquiry before considering further assistance.

Galea said he understood the need for social assistance but warned that government compensation could discourage some people from obtaining insurance.

“Some people may see this and decide to opt out of their insurance, because if anything happens, the government will step in and help,” he explained.

“The insurance sector is wary when the government decides to step in and act as an insurer. There is a fine line between acting as an insurer and providing social aid.”

He also said insurance policyholders might consider it unfair if their taxes were used to compensate those who had chosen not to take out cover.

Fireworks factory regulation questioned

Galea said reports that the Lourdes firework factory had been operating without insurance were a concern for the association. Insurers needed confidence that fireworks factories were subject to clear rules and effective enforcement.

“Insurance companies need to know that such entities have strict regulations and there is enforcement to ensure they are followed,” he said.

He questioned how insurers could assess the risk posed by fireworks factories without reliable information about the types and quantities of fireworks stored on site and whether regulations were being complied with.

“The issue here is that we see a lack of enforcement, and no way of knowing how the site is operating. There is no way of knowing what sort of risk these companies are taking on board, and that is why it is difficult to cover such fireworks factories.”

Source - https://timesofmalta.com