This blog was last updated on June 23, 2025
Iceland holds a unique and critical position regarding natural catastrophes due to its extraordinary geography and climate.
Situated on the Mid-Atlantic Ridge, the country is one of the most volcanically and seismically active regions in the world, with frequent eruptions, earthquakes, and geothermal activity. Its mountainous terrain and harsh North Atlantic weather also make it highly susceptible to avalanches, landslides and severe storms. Combined with a relatively small and dispersed population, these natural risks pose significant challenges to infrastructure, housing and public safety.
As a result, Iceland has developed a comprehensive and layered system of contributions and levies to collect funds for ensuring rapid response, risk mitigation and long-term resilience against these ever-present threats.
This blog summarises the charges that are payable by insurance companies towards various governmental bodies in relation to natural catastrophes. It’s part of a series that also covers:
Scope of the CATNAT regime
Property owners and insurance companies in Iceland are subject to various fees and assessments related to natural catastrophes.
These include:
- Mandatory property valuation assessments and the corresponding fee (HVF)
- Mandatory catastrophe insurance premiums (CAT)
- Building Safety Fee (BSF)
- Avalanche and Landslide Prevention Tax (ALT)
- Prevention fee (PF or the so-called Lava Levy)
Practical application of the CATNAT regime
Insurance companies are obliged to calculate and – if the fee can be charged to the policyholder – collect the amount of these charges and then pay them to various governmental bodies.
Mandatory property valuation assessments and the corresponding fee (HVF)
In Iceland, by law, property owners are obliged to insure their properties against fire. The value of a property is based on the fire damage assessment (Brunabótamat). Fire damage assessment is performed by the Housing and Public Works Agency. The value of the properties then is managed by the State Land Registry (Fasteignamati) and kept in the property register.
Property owners pay a fee to update and maintain the Land Register. This fee is called the House Valuation Fee (HVF) and is collected and remitted by the insurance companies.
- Apply: All property (building)
- Rate: 0.00252% per annum (0.00021% per month)
- Taxable basis: Fire damage assessment value
Mandatory catastrophe insurance premiums (CAT)
This additional premium’s objective is to create a solidarity fund that covers the costs of damages caused by natural disasters, such as volcanic eruptions, earthquakes, landslides, avalanches and floods.
- Apply: All property, including contents that are insured against fire
- Rate: 0.025%, increased by 50% as a temporary measure until 2035
- Taxable basis: Fire damage assessment value
Building Safety Fee (BSF)
Insurance companies writing businesses in Iceland shall pay an annual fee for the Civil Engineering and Construction Administration (Mannvirkjastofnun). This fee is called Building Safety Fee. Its purpose is to support fire prevention and ensure that structures in Iceland are safe and do not threaten human life, health or the environment.
- Apply: All property (building) and contents
- Rate: 0.0045% per annum
- Taxable basis: Sum insured of the property as per the insurance policy
Avalanche and Landslide Prevention Tax (ALT)
Various works must be done to protect properties against damage and accidents caused by avalanches and landslides. To cover the costs of such works, an annual fee is imposed on all fire-insured properties.
- Apply: All property (buildings)
- Rate: 0.03% per annum
- Taxable basis: Sum insured of the property as per the insurance policy (unless the fire damage assessment value is higher)
Prevention fee (PF or the so-called Lava Levy)
A new fee, the Prevention Fee or Lava Levy, was introduced in 2024 to protect critical infrastructure on the Reykjanes Peninsula.
- Apply: All Property (buildings)
- Rate: 0.008% per annum
- Taxable basis: Fire damage assessment value
Sovos has built good relationships with various offices and governmental bodies, including the Financial Management Authority, which administers the recently introduced prevention fee. Our IPT experts will promptly answer any questions you may have.