A European guide for Freedom of Services insurers

Insurance Guarantee Schemes

Christophe BourdaireRegulatory Analysis

1 2 3Get a better understanding of

the different Insurance Guarantee Schemes in place within the European Union

Why is there more Insurance Guarantee Schemes in place within the European Union

Know to which Insurance Guarantee Schemes you need

to contribute when writing insurance on a Freedom of

Services basis

Key take-aways

1

23

Background

Country by country overview

What’s next?

Insurance Guarantee Schemes

Background

Report on Insurance Guarantee

Schemes in the European Union

2007

European Commission White Paper on Insurance

Guarantee Schemes

2010European

Commission Reasoned Opinion forcing France to extend the access to Construction

Guarantee Fund to Freedom of

Services insurers

2015

EIOPA Discussion Paper on

Resolution Funding and National

Insurance Guarantee Schemes

2018

Solvency 2 Directive Review

2020

Key dates

Definition of Insurance Guarantee Schemes“Insurance Guarantee Schemes (IGSs) provide last-resort protection to consumers when insurance undertakings are unable to fulfil their contractual commitments. They thus protect people against the risk that claims will not be met if their insurance company becomes insolvent”

Diagnosis of the EU market“The lack of harmonised IGS arrangements in the EU hinders effective and equal consumer protection. This may lead to a loss of consumer confidence in the relevant markets and may ultimately put at risk market stability. It may also impede the functioning of the internal insurance market by distorting cross-border competition”

European Commission White Paper 2010

Local legislation in France favourising domestic insurers vs FoS insurers• Claim raised by local broker specialised in Construction Insurance• French Fonds de Garantie was only supporting policyholders when a domestic insurer

would go bankrupt

Amendment to local legislation• Policyholders of FoS insurers supported by Fonds de Garantie since 01 July 2018• New contribution raised by fonds de Garantie to support this extension

European Commission Reasoned Opinion 2015

Construction insurance in France• Subject to specific insurance contracts

• Dommages Ouvrage (DO)• Responsabilité Civile Décennale (RCD)

• Supported by French Fonds de Garantie• Several FoS insurers defaulted

Consequences in Denmark• Major local players affected• New contributions raised by local authorities to finance the Garantifonden

Cross border implications: France and Denmark

Cross-border insurance activity (FoS and FoE)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

0

20000

40000

60000

80000

100000

120000

140000

2007 2016

Gross Written Premium (in million euros) Share

• 13 Members States have at least one IGS• 18 IGSs in place:

• Non-Life insurance covered in 13 Member States

• Life insurance covered in 8 Member States

• 21 Member States have at lest one IGS• 29 IGSs in place:

• Non-Life insurance covered in 14 Member States

• Life insurance covered in 10 Member States

An increasing number of schemes in place

2007 2018

All Member States now provide at least one IGS, except Croatia, Czech Republic, Lithuania, Luxembourg, Netherlands, Slovakia, Slovenia and Sweden

Geographical Scope

• Life and Non-Life schemes• Life only or non-Life only• Specific Non-Life schemes

Lack of Harmonisation

At least 8 territories where parafiscal charges funding IGS are charged on insurance premiums or policies

Funding through premium taxes

Country by country overview

Motor Guarantee Fund• Only Motor insurance covered• 5% on insurance premiums covering Motor

Liability (and Motor Damage to be confirmed)

Cyprus

DenmarkGarantiefonden• Only covering private and personal insurance• DKK 40 per policy covering private risks:

✓ Health✓ Household content✓ Property (including home, sellers' liability,

latent defect, structural warranty)✓ Motor Liability

• Entrance fee: Not less than DKK 100,000

Fonds de Garantie des Risques ObligatoiresMotor Liability insurance

✓ 1.2% on insurance premiums covering Motor Liability

✓ 0.8% of insurance premiums covering Motor Liability (funding annuities)

Construction insurance✓ Annual contribution calculated on 10 previous

years revenue and technical provisions

FADPS - Guarantee Fund for Health ProfessionalsEUR 15 to EUR 25 fixed fee per health professional covered under a professional liability insurance contract

France

GreeceMotor Guarantee Fund• Only Motor insurance covered• 0.6% on insurance premiums covering Motor

Damage• 6.6% on insurance premiums covering Motor

Liability• Entrance Fee: EUR 50,000• Minimum annual contribution: EUR 10,000

IrelandInsurance Compensation Fund• Contribution implemented in 2012 following the

bankruptcy of a local major insurer• 2% on all insurance premiums except when

covering some health, marine, aviation and export credit risks

• Some insurance captives outside scope

Motor Insurers Insolvency Compensation Fund• Only Motor insurance covered• 2% on Motor Liability insurance• Annual filing

Fondo di garanzia per le vittime della strada• Only Motor insurance covered• 2.5% on insurance premiums covering Motor Liability• Taxable basis reviewed every year: 95.88% in 2020

Fondo di garanzia per le vittime della caccia • Only Hunting Liability insurance covered• 10% on insurance premiums covering Hunting Liability• Taxable basis reviewed every year: 95.88% in 2020

Italy

PortugalFundo de Garantia Automóvel• Only Motor insurance covered• 2.5% + 0.21% on insurance premiums covering

Motor Liability• 0.21% on insurance premiums covering Motor

Damage

Consorcio de Compensación de SegurosSurcharge to finance the winding-up activity

✓ 1.5‰ on all insurance premiums except insurance of agriculture buildings and export credit

✓ Rate reduced by half 10 years ago

Surcharge on compulsory motor insurance✓ 1.5% on insurance premiums covering Motor

Liability✓ Rate reduced from 2% in 2018

Spain

What’s next?3

1 2 3Solvency 2

Directive reviewNew risks Other levies

Towards an increased harmonisation of IGSs in 2021?

Could new risks with high level of claims trigger new IGSs or

contributions to insurers?

Regulator levies, Ombudsman levies and optional levies

What can insurers expect?

Thank you.