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FUEDI Plenary Meeting Brussels, november 7th, 2008

The ‘Consorcio de Compensación de Seguros’: a public instrument for the Spanish insurance. Mr. Ignacio Machetti Consorcio de Compensación de Seguros - General Manager. FUEDI Plenary Meeting Brussels, november 7th, 2008. GENERAL CONTENTS The ‘Consorcio de Compensación de Seguros’

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FUEDI Plenary Meeting Brussels, november 7th, 2008

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  1. The ‘Consorcio de Compensación de Seguros’: a public instrument for the Spanish insurance Mr. Ignacio Machetti Consorcio de Compensación de Seguros - General Manager FUEDI Plenary Meeting Brussels, november 7th, 2008

  2. GENERAL CONTENTS • The ‘Consorcio de Compensación de Seguros’ • 1. The Institution • 2. Its Functions • Main features of the ‘extraordinary risks’ system • Some statistical data

  3. I. The ‘Consorcio de Compensación de Seguros’ 1. The Institution a) Short historical overview Damages from Civil War (1936-1939) ‘Riot Risks Compensation Consortium’ (1941) Provisional insurance tool Santander (1941) - fire Canfranc (1944) - fire El Ferrol (1944) - fire Cádiz (1947) - mine explosion Alcalá de Henares (1948) - gunpowder arsenal explosion Severe damages in

  4. ‘Consorcio de Compensación de Seguros’ (Law of december 16th, 1954) Permanent insurance tool Law of december 19th, 1991: Legal Statute • New legal nature • Board of Directors • Principles: • - Subsidiarity (no competence: collaboration with the industry) • - Flexibility and adaptability • - Multi-task institution

  5. b) Legal nature and structure The CCS is a PUBLIC BUSINESS INSTITUTION Own legal personality Own assets (independent from the State’s) Subject to laws regulating privates insurance companies

  6. MINISTRY OF ECONOMY AND FINANCE BOARD OF DIRECTORS (equal private-public composition) Chairman: DIRECTORATE-GENERAL FOR INSURANCE AND PENSION FUNDS GENERAL MANAGER 18 REGIONAL OFFICES NETWORK FINANCIAL DIRECTOR OPERATIONS DIRECTOR I.T. DIRECTOR TECHNICAL & REINSURANCE DIRECTOR SECRETARIAT GENERAL

  7. CHAIRMAN (Director-General for Insurance and Pension Funds) 18 MEMBERSappointed by the Minister of Economy and Finance 9 MEMBERS FROM PRIVATE INSURANCE COMPANIES: - ALLIANZ - AXA - CASER - CATALANA OCCIDENTE SEGUROS - ESPAÑA SEGUROS - GENERALI - MAPFRE - MUTUA PELAYO - VIDACAIXA 9 MEMBERS FROM THE GOVERNMENT Board of Directors

  8. 2. Its Functions 2.1. INSURANCE DUTIES 1. EXTRAORDINARY RISKS 3. AGRICULTURAL INSURANCE 2. MOTOR INSURANCE

  9.  Public Vehicles (on request)  Unaccepted (rejected) Private Vehicles DIRECT INSURANCE:  Unidentified vehicles(2nd Directive) Stolen vehicles(2nd Directive: optional) Uninsured vehicles(2nd Directive) Winding-up undertakings Disputed claims (Controversy) GUARANTEE FUND:  F.I.V.A. (Insured Vehicles Registry) Information Centre NON INSURANCE DUTIES: Motor Insurance

  10. C.C.S. REINSURANCE: Financial protection of the system Agricultural Insurance National System PREMIUM SUBSIDIZED BY THE STATE AND REGIONAL GOVERNMENTS (UP TO 50%) AGROSEGURO Insurance Contract Reinsurance Contract Company 1 _% POLICYHOLDERS Company 2 _% . . . Company n _% CCS: 10%

  11. 2.2. NON INSURANCE DUTIES 4. WINDING-UP ACTIVITY FIVA (Management of the National Registry of Insured Vehicles) Administration of public funds for Export Credit Insurance

  12. II. Main features of the ‘extraordinary risks’ system II.1. What are the ‘extraordinary risks’? NATURAL PERILS SOCIAL-POLITICAL EVENTS Floods and sea dashes Earthquakes Tsunamis Volcanic eruptions Storms (tornadoes and gusts of wind above 135 km./h. included) Falling of meteorites Terrorism Rebellion Insurrection Riots Mob misbehaviour Actions of armed forces in peacetime

  13. II.2. How are they covered? • INSURANCE POLICY • Damage to things • Life or Personal Accidents 2 simultaneous contracts ORDINARY RISKS (fire, theft, etc.) EXTRAORDINARY RISKS (flood, terrorism, etc.) Consorcio de Compensación de Seguros (Compulsory premium –surcharge-) Private insurer (Voluntary premium)

  14. II.3. What kind of losses does it compensate for? PROPERTY ACCIDENTS and LIFE Direct material damages (repair or replacement). Supplementary expenses (mud extraction; demolition and removal; rubble disposal or transport to landfill). Business interruption. Death. Permanent disability. Temporary disability. Only losses from events occurred in Spain + personal injuries from events occurred abroad

  15. II.4. What are the lines of insurance included? Cover compulsorily attached to ordinary policies in certain PROPERTY and PERSONAL lines of insurance PROPERTY LINES PERSONAL LINES Fire Natural ordinary events Land vehicles (vehicle damages, not civil liability) Railways vehicles Robbery Plate glass Machinery breakdown Electronic equipments and computers Completed civil works Business interruption (Post 9/11) Personal accidents Life (Post 9/11 and 3/11 - New!!!)

  16. The CCS covers the extraordinary risks through the ordinary policy issued by the company (taking into account the same amount insured and the same compensation conditions): • - The company manages the policy. • - CCS manages the loss claims and compensation (adjustment included). The ‘Consorcio’ does not directly underwrite the coverage

  17. II.5. What are the terms (clauses) of the compensation? The same goods or persons The same insured capital The same compensation conditions established in the ordinary policy Reference point Deductibles: For direct material damages (except for cars and housing): 7% of the indemnification amount. For business interruption: the same deductible established in the ordinary policy. For personal injuries: None.

  18. II.6. Objectively defined coverage The system doesn’t take into account: • the amount of the losses • the number of insured persons affected • the size of the affected area A previous official declaration about the catastrophic nature of the event is NOT required

  19. II.7. How is it financed? 1st) Compulsory premium (surcharge) in favor of the CCS: To be applied on amount insured in the ordinary policy Insurance companies collect surcharges together with their premiums Companies will credit surcharges to ‘Consorcio’ on a monthly basis Collection commission retained by the companies: 5%

  20. SURCHARGE RATES: • a) For property insurances • a.1.) Direct damages: • . Housing:0.09 per thousand. • . Offices:0.14 per thousand. • . Business, Shopping centres:0.18 per thousand. • . Industrial risks:0.25 per thousand. • . Motor vehicles:rate according to type of vehicle. • . Civil works:rate according to type (up to 1.95 per thousand for industrial ports). • a.2.) Business interruption: • . Housing:0.005 per thousand on amount insured for material damages. • . Other risks:0.25 per thousand on amounts insured for business interruption. • b) For accidents and life insurance:0.005 per thousand.

  21. 2nd) Other financial revenues: • Investment returns.

  22. II.8. Technical Provisions • Regulations identical to those of the private insurance companies (P. for outstanding claims, P. for unearned premiums…). • Special regulation for the Equalization Reserve. IT IS A REAL ‘CATASTROPHE FUND’ Built up with total profits after tax (Amount in 2007: aprox. 4.1 billion €) State Guarantee (never applied).

  23. II.9. Loss assessment • Adjusters do not belong to the Consorcio’s staff. • They are used on an ‘ad hoc’ basis. Used regularly: 40 Used very often: 120 Used ocasionally: depending on disaster intensity and claims No. of ADJUSTERS Adjustment expenses represent4% of the losses paid by Consorcio

  24. III. Some statistical data Total claims distribution per causes (period 1987 – 2007)

  25. Loss Ratio (period 1971 – 2007)

  26. Years with special loss ratio

  27. Premiums and claims distribution (1971 - 2007)

  28. MARCH 11th, 2004, TERRORIST ATTACKS IN MADRID • Casualties: 192 • Wounded: 1.122 1.313 personal injuries 61 material damages 1.374 Claims Total compensations taken on by CCS: 38 mill. €

  29. TERRORIST ATTACK TO TERMINAL 4 IN BARAJAS AIRPORT ON DECEMBER 30th, 2006. • Damages to airport terminal: • Parking:.................................. 21.50 • Terminal & walkways:............... 4.50 • Debris removal:....................... 3.25 • Loss of profits:………………………….. 3.50 • Miscellaneous:......................... 1.25 • TOTAL:.................................. 34.00 mill. € • Damages to vehicles: • 1,139 vehicles (around 12 mill. €) • CCS will take on damages under “all risks” and “glass breaking” policies. TOTAL LOSS: € 46 MILL.

  30. http://www.consorseguros.es

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