Insurance and Industrial Fires: Croatian Companies Still Lagging Behind

In recent years, there has hardly been a season without news of major industrial fires in Croatia – from fires in manufacturing plants, through logistics warehouses, to factories in the chemical and food industries. The consequences are often multi-million, and each new accident raises the same question: are domestic companies sufficiently aware of the risks they are exposed to and are they doing enough to prevent them?

Experts warn that the cause of fires is often not just a ‘spark’ in installations or warehouses, but a combination of outdated infrastructure, insufficient maintenance, and weak investment in safety systems. Another problem lies in the fact that many companies still view insurance more as a cost than as a necessary investment in business safety. We discussed these challenges with Iva Rogović Lekić, CEO of GrECo Specialty GmbH from Vienna, a company owned by the GrECo Group specialized in insurance and reinsurance for industrial sectors such as energy, construction, transport, logistics, aviation, and financial institutions.

Speaking about the level of exposure of the domestic industry compared to the rest of the region, Rogović Lekić emphasizes that Croatia essentially follows the trends of neighboring countries, but that there are factors that increase risks.

– Croatia’s exposure to industrial fires is largely comparable to other countries in the CEE/SEE region, although certain factors specifically affect the risk profile. The presence of outdated industrial infrastructure, differences in regulatory enforcement, and the concentration of industrial zones near urban areas contribute to a medium to high level of exposure. Compared to countries with a more modern industrial base, Croatia may have somewhat elevated risks, especially in situations where older facilities lack modern fire protection systems – said Rogović Lekić.

When asked about the most common causes of industrial fires in Croatia, she emphasized that it is a combination of technical failures and human factors.

– The main causes of industrial fires in Croatia are electrical failures, improper storage of flammable materials, human error, and insufficient maintenance of machinery. The most exposed industries are manufacturing (especially wood, plastic, and chemical processing), the food industry, and the logistics and warehousing sector. Facilities handling flammable raw materials or operating with outdated fire protection systems are particularly vulnerable – she noted.

Speaking about entrepreneurs’ awareness of the importance of insurance and reinsurance, Rogović Lekić emphasizes that the situation is slowly improving, but that a significant number of companies are still not sufficiently aware of the seriousness of the problem.

– Awareness among Croatian companies of the necessity of insurance and reinsurance for industrial fires is growing, but there are still gaps. Larger businesses and those with international exposure generally recognize the value of comprehensive coverage, often due to contractual obligations or risk management policies. However, many small and medium-sized enterprises still underestimate the potential impact of large fires, sometimes viewing insurance primarily as a cost rather than as strategic protection – she highlighted.

She further warned that even where insurance exists, it is often insufficient.

– Even when contracting fire insurance, some companies opt for minimal coverage that often does not include business interruption insurance due to that fire, which means that the insurance will cover the damage caused by the fire, but not the costs that the company actually incurred in terms of fixed operating costs and potential loss of profit. A crucial step is to contract adequate coverage and assess the risks to which the company is exposed. This is the broker’s job; we are the ones who propose the optimal insurance program and are financially responsible for the proposed coverage – she explained.

Fire Risks Directly Affect the Price and Terms of Insurance

When comparing domestic companies with those operating in developed markets, the differences are most visible in investment in prevention and risk management.

– Companies in more developed markets more frequently apply advanced technologies for fire prevention, regularly conduct risk assessments, and have detailed emergency plans. In contrast, some Croatian firms – especially smaller or domestically oriented ones – often rely on basic compliance with regulations and conduct risk audits less frequently. Investments in detection and fire extinguishing systems and employee training are generally higher among multinationals or exporters than among local SMEs – said Rogović Lekić.

Commenting on how fire risks affect the insurance market, she emphasized that the link between safety measures and policy pricing is direct.

– Industrial fire risks directly affect the price and terms of insurance in Croatia. High-risk industries or facilities with weak protective measures often face higher premiums, stricter policy conditions, or even limited availability of coverage. Insurers may require detailed risk assessments and evidence of implemented measures before offering comprehensive protection. In regions with recent major fires, the insurance market can become more restrictive, leading to price increases and reduced capacity – she pointed out.

One of the most common problems, according to her, is the neglect of basic safety and prevention measures.

– The most frequently neglected segments are regular maintenance of fire protection systems, appropriate employee training, and proper documentation of safety procedures. Some companies do not update risk assessments after changes in operations or organization, while others do not invest in modern technologies for fire detection and extinguishing. Poor housekeeping and inadequate separation of flammable materials also often increase the risk of fire. I would say that the hygiene of risk management in Croatian companies is quite varied – warned Rogović Lekić.

Speaking about future trends, she emphasized that the industry and insurers will have to respond to new challenges brought by technology, regulation, and climate change.

– Key challenges will be adapting insurance solutions to changing industrial processes, integrating new technologies for fire protection, and responding to regulatory changes. Climate risks, the complexity of supply chains, and the possibility of more frequent or intense fires due to extreme weather conditions will further affect risk assessment. Educating SMEs about the importance of adequate insurance and maintaining the capacity and expertise of insurers in a dynamic environment remain ongoing challenges – she concluded.

Awareness of the Need for Property Insurance Extremely Low

More information about industrial fires and insurance against them was obtained from the Croatian Insurance Bureau (HUO). Many insurers also offer coverage for indirect damage to companies, namely insurance for production downtime due to fire. Insurance for production downtime due to fire covers business costs (service costs, depreciation, labor costs, and other expenses) during the time when the company cannot operate due to the occurrence of the insured event. It is important to emphasize that insurers have the resources and mechanisms for quick and effective response in challenging situations, as primary risk bearers caused by harmful events.

– Although we have recently recorded a slight increase in the number of fire and natural disaster insurance policies (an average increase of 4.1 percent annually in the period 2022-2024), this type of insurance accounts for only 6.24 percent of the total number of insurance policies in Croatia (2024), or 7.6 percent of the total gross premium charged (2024). These data indicate the importance of raising citizens’ awareness of the necessity of insuring all property against fire, floods, and other hazards in the event of natural disasters, human error, or intentional damage, and this with minimal monthly amounts – stated the HUO.

They emphasize that, looking at the bigger picture, the level of property insurance and awareness of the need for property insurance in Croatia is still extremely low, leading to a huge gap in insurance protection known as the ‘protection gap’.

– While the ‘protection gap’ in countries with a more developed insurance culture ranges from 20 to 30 percent, in Croatia it reaches as high as 99 percent despite the fact that Croatia is among the EU countries with the highest percentage of citizens who own their own property (89.9 percent of citizens own the property they live in – said the HUO.

The insurance market in our country will certainly see development, but Croatia still lags behind more developed EU markets.

– For example, the property insurance premium in Croatia currently amounts to 67 euros per capita, which is significantly less than the European average of 193 euros, which is why property insurance, unfortunately, is still an insufficiently practiced investment in one’s own protection and safety. Greater penetration of insurance means greater resilience of the economy and society to the consequences of harmful events and natural disasters, which are then easier to recover from – concluded the HUO.