Iceland Facing Greatest Challenge Since Republic’s Founding

Prime Minister of Iceland Katrín Jakobsdóttir

Prime Minister Katrín Jakobsdóttir delivered an oral report to Parliament yesterday on the new challenges facing the Reykjanes Peninsula due to recent volcanic activity. She emphasised that, while Iceland was facing its most significant natural disaster challenges, the country was better prepared than ever. A comprehensive hazard assessment led by the Icelandic Meteorological Office is underway and is expected to be completed by 2025.

The luxury of relative calm

Taking the podium before Parliament yesterday, Prime Minister Katrín Jakobsdóttir delivered an oral report on the new reality facing residents of the Reykjanes peninsula. Katrín noted that the Icelanders had been no strangers to natural disasters since the settlement, although they had enjoyed “the luxury of a relatively calm environment” around the most densely populated area of the country over the past centuries. 

Geoscientists had, however, pointed out that the Reykjanes peninsula would awaken sooner or later, given that volcanic activity on the Reykjanes peninsula is cyclic, occurring every 800 to 1000 years.

Read More: In Focus (A Brief Chronology of the Recent Reykjanes Eruptions)

“As nearly 800 years have passed since the last known eruptions on the peninsula, and with eruptions starting almost four years ago, it should have been clear to everyone that events could unfold sooner or later,” Katrín continued. “This reality has become apparent to us and reminds us just how much our lives and existence are shaped by nature.” 

Greatest challenge in the history of the Republic

Katrín recalled visiting the area near the town of Grindavík on Monday and observing how new lava and protective barriers had altered the landscape, following the three eruptions that had occurred near Grindavík since December 18.

During the most recent event on February 8, the eruption initially seemed to pose little danger, but soon lava began flowing powerfully over Grindavík Road and the hot-water pipeline, known as the Njarðvíkur conduit, which transports hot water to all residents of the Suðurnes region from the Svartsengi power plant. This resulted in four days without hot water for residents of the Suðurnes region, representing one of the darkest scenarios we had anticipated.”

Given these recent events, the Minister went on to characterise the coming years on the Reykjanes peninsula as the greatest challenge facing the Republic since its founding: “I am confident in stating that our society is currently confronting the most significant natural disaster challenges in the history of our republic. However, I also assert that we are more prepared to address these challenges now than at any previous point in time,” Katrín stated. 

The Icelandic Republic was established on June 17, 1944, ending the union with Denmark.

Comprehensive hazard assessment to be finalised in 2025

Katrín concluded by emphasising that work had begun on the creation of a comprehensive hazard assessment for the Reykjanes Peninsula as led by the Icelandic Meteorological Office. 

“This is extremely important because there are many volcanic systems beneath the Reykjanes peninsula, and a great deal has been done to expedite this work because it takes considerable time. The aim is to publish the results in stages so that we receive interim reports on the work. We expect this project to be completed in 2025.” 

The assessment will cover the effects and impact areas of earthquakes and lava flow near populated areas, and it will also include a risk assessment on the effect of ash and gases in the atmosphere. Katrín noted that such a hazard assessment had already been conducted for the most active part of the Reykjanes Peninsula and that the rest of the assessment would be published in stages until the year 2025.

Iceland to Address Natural Disasters with New National Fund

Minister for Foreign Affairs Þórdís Kolbrún Reykfjörð Gylfadóttir

Finance Minister Þórdís Kolbrún Reykfjörð Gylfadóttir plans to propose a bill establishing a national fund, financed with dividends from the operations of Landsvirkjun, Iceland’s National Power Company. The fund would be used to address unexpected challenges in the nation’s economy, such as those that have recently arisen following the geological unrest in Grindavík.

New urgency to old ideas

In an interview with RÚV earlier this week, Sigurður Kári Kristjánsson, former MP and current chairperson of Iceland’s Natural Disaster Insurance, stated that it was necessary for the government to establish a national fund to manage unconventional challenges, such as those facing the town of Grindavík (recent geologic unrest and a volcanic eruption in January have greatly damaged the town’s infrastructure). Such a fund would also be useful for unforeseen challenges related to climate change. 

Asked about this issue, Minister of Finance Þórdís Kolbrún Reykfjörð Gylfadóttir told RÚV yesterday that she agreed with this assessment and that she intended to present a bill for a National Fund (Þjóðarsjóður) that would undergo parliamentary processing this year. 

As noted by, the idea for such a national fund is not new. Former Finance Minister Bjarni Benediktsson proposed the establishment of a national fund in 2016 and that proposal was also included in the government coalition agreement of the Independence Party, the Left-Green Movement, and the Progressive Party in 2017. 

Þórdís Kolbrún herself delivered a speech at the annual meeting of Landsvirkjun, the National Power Company, in February of 2019, where she underscored this commitment to a national fund and explained how it would be financed:

“As you know, there has been discussion for some time about allocating dividends from the operations of Landsvirkjun to a National Fund, which will be used to respond to unexpected challenges in the nation’s economy. A bill regarding the National Fund has now been presented to Parliament, and I wholeheartedly support that we Icelanders show prudence and foresight in this manner.”

As noted by Þórdís Kolbrún, there were plans to present a bill about the national fund during the 2018-2019 parliamentary session, but it did not materialise.

Resolving the treasury’s debt first

Þórdís Kolbrún noted that the fund would not be established until the state’s debt situation following the pandemic improved. 

“We have dealt with a pandemic and now natural disasters, which Icelanders have, of course, experienced in the past. This is, nevertheless, an unprecedented situation,” Þórdís Kolbrún told RÚV, again underscoring that the fund would be financed by the profits of energy companies. 

“The idea is that these additional revenues from dividends from energy companies would, for example, go into the fund,” Þórdís continued. She observed that the fund was already on the parliamentary agenda and that she would present the bill again so that it could undergo parliamentary processing this year.

(Landsvirkjun, the National Power Company of Iceland, is a state-owned entity that generates between 60-70% of all electricity used in Iceland. The company operates a total of eighteen power stations across Iceland, which include fifteen hydropower stations, three geothermal power stations, and two wind turbines. Landsvirkjun’s financial results for 2022 were exceptionally strong, marking the best financial results in the company’s history. In a recent interview with, Minister of Foreign Affairs Bjarni Benediktsson stated that now was an opportune time to put the strong financial results from Landsvirkjun to good use in the form of a national fund.)

Estimated Damage in Grindavík ISK 10 Billion

grindavík evacuation

The damage to homes and infrastructure in Grindavík could amount to ISK 10 billion [$71.4 million, €66.3 million], according to the director of the Natural Catastrophe Insurance of Iceland. Before paying out damages, authorities must reconsider the town’s zoning plan and whether some areas will be deemed no longer safe for residential housing. The town has been evacuated since November 10, after seismic activity and a magma dike opened crevasses and damaged roads, homes, and infrastructure.

230 Grindavík properties damaged

All buildings in Iceland are insured against natural disasters and insurance premiums are collected alongside fire insurance. The Natural Catastrophe Insurance of Iceland, a public institution tasked with insuring the main value of properties against natural disasters, has received reports of damage to 230 properties in Grindavík. So far, 140 of them have been inspected and the institution’s director Hulda Ragnheiður Árnadóttir stated she hopes the remaining 90 will be inspected by the end of the week.

Zoning reconsidered in Grindavík

The seismic events in Grindavík began in late October and earthquakes and land deformation continued over several weeks. Land deformation is still ongoing at Svartsengi, north of Grindavík. Hulda Ragnheiður says the circumstances of the damage are unusual as it occurred over a relatively long period of time. “That’s why it’s difficult to start paying out damages while it hasn’t been decided which areas are suitable for habitation.”

Experts have stated that Grindavík is at risk of further earthquakes and eruptions in the coming weeks and months and it is still unclear when it will be safe for the town’s 3,600 residents to return home. In some areas where damage has occurred, authorities may decide to ban rebuilding due to ongoing risk.

“I think it’s inevitable that the layout of the town will change in some way,” Hulda Ragnheiður stated. “All of the decisions that will be made are in the jurisdiction of the municipality of Grindavík in collaboration with scientists and the government. We will receive the information that comes out of that and process it.”

Risk of Landslides Returns to Seyðisfjörður

An alert phase has been declared in Seyðisfjörður, East Iceland, due to the risk of landslides. Around 20 residents have been evacuated from their homes in order to ensure their safety. The town was devastated by a series of landslides last December, which destroyed or damaged 14 buildings in the town. Many residents are now being evacuated for the second or third time.

Meanwhile, in Tröllaskagi, Northeast Iceland, an uncertainty phase due to the risk of landslides remains in effect. Some 30 residents who were evacuated from farms in the area have not yet been permitted to return to their homes. At least two additional landslides fell in the area today, bringing the total number to at least 22 since heavy rain saturated the mountains last weekend.

An emergency response centre has been opened in Seyðisfjörður for those who have had to leave their homes. The Civil Protection Department and the Icelandic Met Office are evaluating the risk on a regular basis with the help of equipment on the mountain slopes that collects data on land movement.

Davíð Kristinnsson, vice-chair of the Seyðisfjörður Search and Rescue team, says residents have been affected by the news of landslides from Tröllaskagi, as well as the heavy rain that has hit the town. Last year’s landslides have left their mark on the community: “once you’ve heard the mountain scream, it isn’t easy to forget.”