The Belgian insurance market is preparing for a change that will impact homeowners and property investors alike. In 2024, fire insurance premiums are set to increase, a trend that has been ongoing but with a notable difference in the rate of increase this time around.
Understanding the Increase in Fire Insurance Premiums
The calculation of fire insurance premiums in Belgium is based on the Abex Index, which reflects the price evolution in the construction sector. This index is adjusted biannually, in May and November. As of the end of November, the Abex Index stood at 1,041, up from 1,004 a year ago, marking a 3.7% increase. This rise is significantly less than the 10.8% increase observed from 2022 to 2023, which was one of the most substantial in recent history. Impact of Construction Material Prices The primary driver behind the Abex Index, and consequently the fire insurance premiums, is the cost of construction materials. The surge in these prices in 2022 led to the notable increase of 10.8%. Fortunately, these prices have stabilized since, leading to a less significant indexation for the coming year.
New Value Insurance in Belgium
In Belgium, properties are insured for their new value, which means the insurance covers the cost of rebuilding or replacing the property as new. This approach ensures that homeowners can restore their properties to their original state in the event of a fire or other damages covered by their policy. Insurance Companies’ Response to the Index Change While insurance companies in Belgium are free to decide whether or not to pass this increase onto their customers, history shows that approximately 98% of insurers tend to follow the Abex Index when adjusting their premiums. This means that most property owners can expect to see an increase in their fire insurance costs in 2024.
Comparing the Rate of Increase
The rate of increase in fire insurance premiums has been a subject of concern for many Belgians. The previous year’s hike of 10.8% was exceptional and reflected the significant rise in construction material costs. The current increase of 3.7%, while still notable, is more moderate and reflects the recent stabilization in material prices. Strategies for Homeowners Given these changes, homeowners and property investors in Belgium should be proactive. Reviewing existing insurance policies, comparing offers from different insurers, and considering ways to reduce risk and thus premiums are prudent steps to take.
Conclusion
The projected increase in fire insurance premiums in 2024 is a consequence of fluctuating construction costs, as reflected in the Abex Index. While this rise is less drastic than the previous year’s, it nonetheless signifies an added cost for homeowners and property investors. Understanding these market dynamics is crucial for effective financial planning and maintaining adequate insurance coverage for valuable real estate assets in Belgium.
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