Carmel inferno likely to cost Israel billions of shekels
Most private property was insured, Finance Ministry says, but government still will have massive expenses, including a new national firefighting team.
After a weekend of battling the worst fire in the country's history, a blurry picture of the economic damage is beginning to emerge. The Finance Ministry has not yet begun to calculate the extent of the damage, both direct and indirect, but the final tally will likely be in the billions of shekels, if not more.
The Finance Ministry budgets department and accountant general are working with the Interior Ministry to enable immediate funding to evacuate residents of the Carmel, said an official.
The Finance Ministry also is likely aware that it will be taking a large chunk of the blame from the public, due to its tendency to deny expenditures.
The ministry noted on Friday that most of the private property damaged by the fire was insured. However, the cost to the national government is likely to be huge. Government property is insured by Inbal, a government insurance company, whose expenses are covered by state coffers.
Plus, the government will be spending large sums to rehabilitate the land around the Carmel Forest Spa Resort and the towns in the area. Some of the money will be needed immediately, while other parts of the rehabilitation will take years.
And then there's the cost of setting up a national fire squad, including purchasing advanced equipment and firefighting planes. In addition, the government will be paying hundreds of thousands of shekels to firefighting teams that came from abroad.
However, there could also be a positive side to this - all the money poured into the rehabilitation efforts could boost the economy of Israel's north.
Even though the cost to the country's private insurance companies also will be immense, they will be able to handle it without collapsing, sources said over the weekend.
"To the best of our knowledge, at the moment, most of the damage to private property is insured by private insurance companies. Both the Carmel Forest Spa Resort and Kibbutz Beit Oren are insured by Israeli companies," a Finance Ministry source said.
Furthermore, the Israeli insurance companies have their own insurance to protect them in such cases, the source noted.
"These companies are protected by secondary insurance from foreign companies, and therefore their financial exposure to the disaster is low, and there are no concerns regarding the stability of any given companies," the source said.
The insurance companies buy secondary insurance to protect them from having to cover damage beyond a given ceiling, or beyond a given percentage. Therefore, they will be paying out up to the value of the ceiling, and no more.
An event such as the fire is considered a "catastrophe," which means the companies do not calculate the damage to each home or business individually, but rather as an aggregate.
Most of the government property damaged by the fire is insured by the government insurance company Inbal. This will be a source of funding for rehabilitation. The government will assist private citizens whose property was not insured, added the treasury official.
These will be the main people to sustain damage - that, and people who were "under insured," meaning they had insurance but not for the full value of the property.
Menora-Mivtachim is thought to be the pension fund for most of the 40 prison guard trainees who were killed when their bus was overcome by fire on Thursday. It is the default insurance fund for Prison Service employees.
Menora expressed sorrow at the tragedy, but added that it would not affect the value of most other fund members' pensions.
Clal Insurance is the insurer of Carmel Forest Spa Resort.
Many of the kibbutzim and farms in the area, including Beit Oren, are insured by Bituach Haklai Central Cooperative Society. While many homes in Beit Oren incurred significant damage, the kibbutz was evacuated in time, its henhouses were empty, and its horses taken away, which minimized the extent of the damage.
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