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FUEDI Plenary MeetingBrussels, november 7th,
2008
Mr. Ignacio MachettiMr. Ignacio MachettiConsorcio de Compensación de Seguros - General ManagerConsorcio de Compensación de Seguros - General Manager
The ‘Consorcio de Compensación de Seguros’:
a public instrument for the Spanish insurance
3
GENERAL CONTENTSGENERAL CONTENTS
I. The ‘Consorcio de Compensación de Seguros’
1. The Institution
2. Its Functions
II. Main features of the ‘extraordinary risks’ system
III. Some statistical data
4
Damages from Civil War (1936-1939)
‘‘Riot RisksRiot Risks Compensation Consortium’ (1941) Compensation Consortium’ (1941)
Provisional insurance tool
Severe damages in
Santander (1941) - fire
Canfranc (1944) - fire
El Ferrol (1944) - fire
Cádiz (1947) - mine explosion
Alcalá de Henares (1948) - gunpowder arsenal explosion
a) Short historical overview
I. The ‘Consorcio de Compensación de Seguros’I. The ‘Consorcio de Compensación de Seguros’
1. The Institution
5
‘‘Consorcio de Compensación de Seguros’Consorcio de Compensación de Seguros’(Law of december 16th, 1954)(Law of december 16th, 1954)
‘‘Consorcio de Compensación de Seguros’Consorcio de Compensación de Seguros’(Law of december 16th, 1954)(Law of december 16th, 1954)
Permanent insurance tool
1. New legal nature2. Board of Directors3. Principles:
- Subsidiarity (no competence: collaboration with the industry)- Flexibility and adaptability- Multi-task institution
Law of december 19th, 1991: Legal Statute
6
Own legal personality
Own assets (independent from the State’s)
Subject to laws regulating privates insurance companies
The CCS is a PUBLIC BUSINESS INSTITUTIONThe CCS is a PUBLIC BUSINESS INSTITUTIONThe CCS is a PUBLIC BUSINESS INSTITUTIONThe CCS is a PUBLIC BUSINESS INSTITUTION
b) Legal nature and structure
7
GENERAL MANAGERGENERAL MANAGER
FINANCIAL DIRECTOR
TECHNICAL & REINSURANCE
DIRECTOR
BOARD OF DIRECTORSBOARD OF DIRECTORS(equal private-public composition)
Chairman:DIRECTORATE-GENERAL FOR INSURANCE AND PENSION FUNDS
BOARD OF DIRECTORSBOARD OF DIRECTORS(equal private-public composition)
Chairman:DIRECTORATE-GENERAL FOR INSURANCE AND PENSION FUNDS
18 REGIONAL OFFICES NETWORK
MINISTRY OF ECONOMY AND FINANCEMINISTRY OF ECONOMY AND FINANCEMINISTRY OF ECONOMY AND FINANCEMINISTRY OF ECONOMY AND FINANCE
SECRETARIAT GENERAL
OPERATIONS DIRECTOR
I.T.
DIRECTOR
8
9 MEMBERS FROM PRIVATE INSURANCE
COMPANIES:
- ALLIANZ
- AXA
- CASER
- CATALANA OCCIDENTE SEGUROS
- ESPAÑA SEGUROS
- GENERALI
- MAPFRE
- MUTUA PELAYO
- VIDACAIXA
CHAIRMANCHAIRMAN(Director-General for Insurance and Pension Funds)
CHAIRMANCHAIRMAN(Director-General for Insurance and Pension Funds)
18 MEMBERS appointed by theMinister of Economy and Finance18 MEMBERS appointed by theMinister of Economy and Finance
9 MEMBERS FROM
THE GOVERNMENT
Board of Directors
9
1. EXTRAORDINARY
RISKS
1. EXTRAORDINARY
RISKS2. MOTOR
INSURANCE
2. MOTOR
INSURANCE3. AGRICULTURAL
INSURANCE
3. AGRICULTURAL
INSURANCE
2.1. INSURANCE DUTIES
2. Its Functions
10
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:
Public Vehicles (on request)
Unaccepted (rejected) Private VehiclesDIRECT INSURANCE:
Motor InsuranceMotor Insurance
11
InsuranceContract
POLICYHOLDERSPOLICYHOLDERSPOLICYHOLDERSPOLICYHOLDERS
AGROSEGUROAGROSEGUROAGROSEGUROAGROSEGURO
CCS: 10%
Company 1 _%
Company 2 _%
Company n _%
. . .
ReinsuranceContract
C.C.S.C.C.S.C.C.S.C.C.S.
REINSURANCE:Financial
protection of the system
PREMIUM SUBSIDIZED BY THE PREMIUM SUBSIDIZED BY THE STATE AND REGIONAL STATE AND REGIONAL
GOVERNMENTS (UP TO 50%)GOVERNMENTS (UP TO 50%)
Agricultural Insurance National SystemAgricultural Insurance National System
12
4. WINDING-UP
ACTIVITY
4. WINDING-UP
ACTIVITYAdministration of public
funds for Export Credit
Insurance
Administration of public
funds for Export Credit
Insurance
FIVA (Management of the
National Registry of Insured
Vehicles)
FIVA (Management of the
National Registry of Insured
Vehicles)
2.2. NON INSURANCE DUTIES
13
Floodsand sea dashes
EarthquakesTsunamis
Volcanic eruptionsStorms
(tornadoes and gusts of windabove 135 km./h. included)
Falling of meteorites
TerrorismRebellion
InsurrectionRiots
Mob misbehaviourActions of armed forces
in peacetime
NATURAL PERILSNATURAL PERILS SOCIAL-POLITICAL EVENTSSOCIAL-POLITICAL EVENTS
II. Main features of the ‘extraordinary risks’ systemII. Main features of the ‘extraordinary risks’ system
II.1. What are the ‘extraordinary risks’?
14
INSURANCE POLICYINSURANCE POLICY- Damage to things
- Life or Personal Accidents
INSURANCE POLICYINSURANCE POLICY- Damage to things
- Life or Personal Accidents
2 simultaneous contracts2 simultaneous contracts
ORDINARY RISKS
(fire, theft, etc.)
Private insurer
(Voluntary premium)
EXTRAORDINARY RISKS
(flood, terrorism, etc.)
Consorcio de Compensación de Seguros
(Compulsory premium –surcharge-)
II.2. How are they covered?
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Only losses from events occurred in Spain + personal injuries from events occurred abroad
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.
PROPERTYPROPERTY ACCIDENTS and LIFEACCIDENTS and LIFE
II.3. What kind of losses does it compensate for?
16
Cover compulsorily attached to ordinary policies in certain PROPERTY and PERSONAL lines of insurance
FireNatural ordinary events Land vehicles (vehicle damages, not civil liability) Railways vehicles RobberyPlate glassMachinery breakdownElectronic equipments and computersCompleted civil worksBusiness interruption (Post 9/11)
Personal accidentsLife (Post 9/11 and 3/11 - New!!!)
PROPERTY LINESPROPERTY LINES PERSONAL LINESPERSONAL LINES
II.4. What are the lines of insurance included?
17
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
18
Reference point
The same goods or persons
The same insured capital
The same compensation conditions
establishedin the
ordinarypolicy
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.
Deductibles:
II.5. What are the terms (clauses) of the compensation?
19
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 thecatastrophic nature of the event is NOT required
II.6. Objectively defined coverage
20
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%
II.7. How is it financed?
1st) Compulsory premium (surcharge) in favor of the CCS:
21
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.
23
Built up with total profits after tax(Amount in 2007: aprox. 4.1 billion €)
Built up with total profits after tax(Amount in 2007: aprox. 4.1 billion €)
IT IS A REAL ‘CATASTROPHE FUND’IT IS A REAL ‘CATASTROPHE FUND’IT IS A REAL ‘CATASTROPHE FUND’IT IS A REAL ‘CATASTROPHE FUND’
Regulations identical to those of the private insurance companies (P. for outstanding claims, P. for unearned premiums…).
Special regulation for the Equalization Reserve.
State Guarantee (never applied).
II.8. Technical Provisions
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- Adjusters do not belong to the Consorcio’s staff.
- They are used on an ‘ad hoc’ basis.
No. of ADJUSTERS
Used regularly: 40
Used very often: 120
Used ocasionally: depending on disaster
intensity and claims
Adjustment expenses represent 4% of the losses paid by Consorcio
II.9. Loss assessment
25
Total claims distribution per causes Total claims distribution per causes (period 1987 – 2007)Total claims distribution per causes Total claims distribution per causes (period 1987 – 2007)
Flood 2,628,720,690 83.2% 3,814,152 4.9% 2,647,614 49.0%
Earthquake 32,089,519 1.0% 201,328 0.3% 5,044 0.1%
Storms 181,928,364 5.8% - 0.0% 2,598,456 48.0%
Meteorites 91,303 0.0% - 0.0% - 0.0%
Terrorism 246,873,898 7.8% 74,044,487 94.4% 155,071 2.9%
Riots & Mob misbehav.
65,820,383 2.1% 160,256 0.2% 2,665 0.0%
Acts of Armed Forces
1,913,608 0.1% 156,440 0.2% - 0.0%
TOTAL 3,157,437,765 100% 78,376,663 100% 5,408,850 100%Euros Updated
(* ) Period 2004-2007
BUSINESS INTERRUPTION (* )CAUSE
PERSONAL ACCIDENTS
PROPERTY
III. Some statistical dataIII. Some statistical data
26
Loss Ratio Loss Ratio (period 1971 – 2007)Loss Ratio Loss Ratio (period 1971 – 2007)
TOTAL LOSS PAYMENTS RATIO (% )
1971 - 1980 1,025,195,184 849,554,878 82.9%
1981 - 1990 1,531,790,187 2,226,445,127 145.3%
1991 - 2000 3,134,936,477 1,267,151,389 40.4%
2001 427,602,589 191,189,078 44.7%
2002 434,305,350 159,214,909 36.7%
2003 476,470,043 108,646,661 22.8%
2004 506,271,525 128,215,336 25.3%
2005 540,061,003 169,018,745 31.3%
2006 574,029,780 160,182,954 27.9%
2007 600,373,052 216,045,312 36.0%
TOTAL 9,251,035,191 5,475,664,387 59.2%
PREMIUMSYEARS
27
Years with special loss ratioYears with special loss ratio
TOTAL LOSS
PAYMENTS RATIO (% )
1982 130,721,290 369,958,028 283.0%
1983 130,627,719 855,961,645 655.3%
1987 139,466,718 335,963,252 240.9%
1989 210,269,785 273,132,116 129.9%
Euros Updated
PREMIUMSYEARS
28
Premiums and claims distributionPremiums and claims distribution(1971 - 2007)
Premiums and claims distributionPremiums and claims distribution(1971 - 2007)
-
100
200
300
400
500
600
700
800
90071 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07
Mil
lio
ns
Eu
ros
PREMIUMS UPDATED TOTAL PAYMENTS UPDATED
29
• Casualties: 192
• Wounded: 1.122
1.374 Claims1.313 personal injuries
61 material damages
Total compensations taken on by
CCS:
38 mill. €
MARCH 11th, 2004, TERRORIST ATTACKS IN MADRID
30
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.