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We act for the protection of cross-border road traffic victims

Hayk ZAYIMTSYAN

Risk and Monitoring Manager

Council of Bureaux

The importance of financial stabilityof National Bureaux and member companies

within the Green Card system

COUNCIL OF BUREAUX

The Council of Bureaux

▪ Founded in 1949 by 13 countries

▪ Functioning under the aegis of UNECE (Geneva)

▪ Managing the ‘Green Card System’

▪ Secretariat based in Brussels

▪ Purely technical, not a lobbying and non-political

organisation

2

COUNCIL OF BUREAUX

System objectives & CoB mission

▪ Facilitating international traffic

▪ Protecting victims of international

road traffic accidents

Mission of the CoB:

We act for the protection of cross-

border road traffic victims

3

Frontier

insurance

Green Cardor

“deemed

insurance

cover”

in EEA

►►

COUNCIL OF BUREAUX

The Green Card system

4

COUNCIL OF BUREAUX


▪ All European countries are member (except Armenia, Georgia and Kazakhstan)

▪ Extra-European members are Israel, Iran,

Morocco and Tunisia

▪ Pending membership requests from Algeria,

Armenia and Georgia

▪ A very heterogeneous system from cultural,

economical, financial, political and legal points of

view ►►potential frictions and complexity

5

COUNCIL OF BUREAUX


6

Green Card

Bureau

Insurer A

Insurer B

Insurer C

Green Card

Bureau

Insurer α

Insurer β

Insurer γ

COUNCIL OF BUREAUX

Green Card

BureauGreen Card

Bureau

Green Card

Bureau

COUNCIL OF BUREAUX


▪ Each member country has an independent ‘Bureau’

authorized to issue ‘Green Cards’

▪ The Bureau of the country visited secures that

eventual claims are handled according to local law (= Handling Bureau)

▪ The Bureau, under the authority of which the Green

Card has been issued, guarantees that the Handling

Bureau is reimbursed under all circumstances (= Guaranteeing Bureau)

7

COUNCIL OF BUREAUX

The “Green Card”: specimen

COUNCIL OF BUREAUX

Germany Czech Republic

Cross-border accidents

COUNCIL OF BUREAUX

Germany

German driver

is liable


Czech Republic

COUNCIL OF BUREAUX


11

Germany

Payment

Reimbursement

demand

Payment of

reimbursement

Claim handlerGerman insurer

Claim

Czech Republic

COUNCIL OF BUREAUX

What happens if…

▪ The insurer fails to pay on time or is insolvent

▪ The liable driver / vehicle is uninsured

▪ The liable driver / vehicle is unidentified or untraced (hit-

and-run)

▪ The Green Card is false or unauthorised

12

COUNCIL OF BUREAUX

Cross-border accidents: GCBx

13

Germany

Payment

Reimbursement

demand pending

NO payment of

reimbursement

Claim handlerGerman insurer

Claim

▪ Insurer default (failure to pay in time)

▪ Insurer insolvency

Czech Republic

COUNCIL OF BUREAUX

Cross-border accidents: GCBx

14

Germany

PaymentClaim

▪ Cross-border uninsurance (EEA+Switzerland+Andorra+Serbia)

▪ False Green Cards

Reimbursement

demand

Payment of

reimbursement

Czech Republic

COUNCIL OF BUREAUX

The financial burden on Bureaux

▪ Green Card Bureaux may step in to compensate victims

or reimburse claim handlers

▪ Green Card Bureaux may have to step in as guarantor of

their members’ obligations

▪ Green Card Bureaux can be the ultimate paying entity in

certain cases: ▪ Insurer insolvency (depends on national legislation)

▪ Uninsured driving / hit and run (“EEA+”)

▪ False Green Cards

▪ Green Card Bureaux are financed through contributions

from their members, usually in % of premium (GWP). ▪ Is this always enough?

15

COUNCIL OF BUREAUX


▪ 48 countries / 47 Bureaux

▪ Over 500 million registered vehicle fleet *

▪ Up to 500 000 cross-border accidents annually **

▪ 1500+ insurers issuing Green Cards ***

* Data from CoB Member

Bureaux and other sources,

2013-2016

** estimate, 2018

*** CoB data, 2017

16

COUNCIL OF BUREAUX


▪ More than 1 000 cross-border accidents per day

▪ Multiple stakeholders and involved parties:

▪ Insurers

▪ Claims handling offices

▪ Bureaux

▪ Complex cross-border cash flows constantly,

which do not “match” in time and space

►► liquidity and solvency critically important

at all times and on all levels

17

COUNCIL OF BUREAUX

Statistics: geography of accidents

18

COUNCIL OF BUREAUX


19

COUNCIL OF BUREAUX


20

COUNCIL OF BUREAUX


Largest Green Card

accident “exporters”

21Source: Handling Bureaux statistics

▪ Indiv. net balance ~ 35’000 accidents:

▪ 2013: one Bureau

▪ 2017: four Bureaux

▪ Aggregate net balance system-wide:

▪ 2013: 125’000 accidents

▪ 2017: 160’000 accidents

COUNCIL OF BUREAUX

Statistics: Moldova and the region

22

The South-Eastern region in the context of the

Green Card system (CoB classification):

▪ 14 countries AL, AZ, BG, BiH, CY, GR, IL, IR, MD, MK, MNE, RO, SRB, TR

▪ A mix of EEA Members (MA signatories) and “pure Green

Card” countries

▪ Over 80 million

vehicle fleet

(ca. 15% of the

whole system)

20

9,0

98

52

0,1

34

56

3,1

06

68

0,9

36

80

3,1

99

1,0

81

,19

4

1,3

30

,55

1

2,1

00

,00

0

2,3

45

,38

7

3,3

00

,43

4

7,0

10

,60

8

8,1

72

,94

8

21

,09

0,4

24

33

,30

0,0

00

75,000

750,000

7,500,000

75,000,000

MNE MK AL CY MD BIH AZ IL SRB BG RO GR TR IR

Number of registered vehicles

Data for 2016

Source: CoB Member Bureaux

LOG scale for registered vehicle fleet

COUNCIL OF BUREAUX


23

49

.64

38

.29

35

.36

26

.27

14

.83

13

.99

11

.16

2.4

2

0.5

5

0.4

1

-

10.00

20.00

30.00

40.00

50.00

60.00

Green Card gross written premium, EUR Mio

Source: CoB Member Bureaux

Data for 2016 (except vehicle fleet data for GB, F)

LOG scale for vehicle fleets and MTPL GWP

MTPL GWP missing for: GB, I, MA, IL

For BiH and MNE, GC premium is included in MTPL

20

,80

0.0

15

,45

1.0

5,5

09

.1

3,6

92

.1

2,5

74

.5

2,5

36

.4

2,2

36

.0

17

2.8

16

5.6

78

.5

15

.7

10.0

100.0

1,000.0

10,000.0

MTPL gross written premium, EUR Mio

81

,19

6

20

9,0

98

31

7,0

00

35

8,9

47

51

8,2

81

35

,55

5,0

62

38

,13

8,0

00

41

,00

0,0

00

57

,10

0,0

00

63

,00

0,0

00

75,000

750,000

7,500,000

75,000,000

Number of registered vehicles

COUNCIL OF BUREAUX


24

Green Card accidents

▪ Estimated up to 19% of all Green Card accidents annually

“exported” from SER countries

▪ Estimated around 6% of all Green Card accidents

annually “imported” to SER

▪ A large number of accidents from SER occur in high

indemnification countries (Italy, Germany, France, UK…)

>> much larger frequency of accidents compared to fleet

(especially considering the specificity of ‘pure GC’ countries)

>> most countries are “net exporters” of accidents

>> not only more accidents, but also more expensive claims

COUNCIL OF BUREAUX


25

Online Guarantee Calls

▪ Around 45% of the guarantee calls are issued to SER

Bureaux; around 22% (27% in amounts) by SER Bureaux

▪ Growth in OGCs is higher for SER compared to system

▪ OGC “frequency” per accident: in some countries higher

than average

>> OGC = reimbursement demand unpaid by insurer (as a rule)

>> bigger share of OGCs than vehicle fleet / number of GCs

larger amounts of OGCs

faster growth in OGC numbers / amounts

COUNCIL OF BUREAUX

Statistics: conclusion

Financial stability is a major challenge

… for the Green Card system as a whole:

▪ More than 1 000 cross-border accidents per day

▪ Multiple stakeholders and involved parties:

▪ Insurers

▪ Claims handling offices

▪ Bureaux

▪ Complex cross-border cash flows constantly, which do

not “match” in time and space

►► liquidity and solvency critically important

at all times and on all levels26

COUNCIL OF BUREAUX

Statistics: conclusion

Financial stability is a major challenge

… and even more so for the CEE region:

▪ The region is an “above average” risk (Green Card

accidents “exported” vs. share of vehicle fleet)

▪ Most countries are “net exporters” of accidents: this puts

additional indirect pressure on the solvency / liquidity of

Bureaux, insurers, and claims handlers

▪ Larger exposures due to circulation in high

indemnification level countries

▪ Less financial discipline? (OGC statistics)

27

COUNCIL OF BUREAUX

Financial stability: markets / insurers

▪ Premiums▪ Single premium vs. domestic MTPL + Green Card

▪ Traffic geography: countries of circulation of vehicles

▪ Reversed ‘production cycle’

▪ Long-tail business

▪ Competitive vs. ‘actuarially justified’ premiums

▪ Reserves (provisions) and investments▪ Adequacy of amounts

▪ Timely communication of changes in reserve advice

▪ Long-tail business BUT constant liquidity needs

28

►►‘cash management’ WILL NOT work

COUNCIL OF BUREAUX

Financial stability: markets / insurers

▪ Portfolios: negative selection ▪ Trucks, buses etc. ►►severity of claims

▪ (Other) commercial fleet ►►frequency of claims

▪ Country of registration vs. country(ies) of circulation of vehicles

▪ Insolvencies ▪ Claims handling entities experience financial strain, as recoveries from

the (potentially) insolvent insurer become difficult

▪ Regional inter-relations and the possibility of a domino effect

▪ An ‘extra’ financial burden on the Bureaux (eventually, the whole market)

29

COUNCIL OF BUREAUX

Financial stability: Bureaux / CoB

▪ Financing of the Bureaux by member insurers

▪ Monitoring of insurers’ financial stability by Bureaux

▪ Reinsurance subscribed by insurers

▪ Additional financial guarantees from under-performing insurers towards Bureaux

▪ Constant risk monitoring of Bureaux / markets / whole systemOnline guarantee calls (volumes and payment speeds), system-based financial stability indicators, market and supervisory data

▪ Dedicated follow-up of some individual Bureaux / marketsMarket and supervisory data, published financial reports, Bureau-specific reporting

requirements, worst-case scenario analyses, etc.

▪ Reinsurance subscribed by BureauxRequired for ‘Transitional’ and ‘Monitored’ Bureaux, voluntary for all other Members

▪ Additional financial guarantees from under-performing Bureaux (markets) towards the CoB

30

COUNCIL OF BUREAUX

Reinsurance

Reinsurance is purchased …

▪ By primary insurance companies ►►CoB not involved

▪ By Bureaux for their own risks only

✓ uninsured driving, false green cards, bankruptcy of members

❖ Example: CoB Excess of Loss programme

▪ By Bureaux for the whole market

✓ All foreign claims, including those of insurers

❖ Required for ‘Transitional’ and ‘Monitored’ Bureaux

… or not ►► risks are transferred to the market

31

COUNCIL OF BUREAUX

Reinsurance: map 2017

32

Market cover (all vehicles abroad) CoB XL cover (uninsured / false GC)

Individual cover (uninsured / false GC) Risk retained or transferred to market

COUNCIL OF BUREAUX

Depends on the

vehicle fleet

Bank guarantee

Registered Vehicles (Million)

Guarantee or Deposit (€Million)

<1 1M

1-5 €1 M+€ 0.5 per vehicle above1M vehicles

5-10 €3 M+€ 0.4 per vehicle above5M vehicles

10-20 €5 M + € 0.3 per vehicle above 10M vehicles

>20 €8 M + € 0.2 per vehicle above20M vehicles

33

Priority of the Excess of Loss Reinsurance Treaty

Minimum amount of Bank Guarantee or Cash

Deposit

Equal or less than €200,000 20 times the priority

Between €200,001 and €300,000

€ 4 M + 5.0 x (priority of the excess of loss reinsurance

treaty - € 200.000)

Between €300,001 and €400,000

€ 4,5 M + 3.0 x (priority of the excess of loss reinsurance

treaty - € 300.000)

Between €400,001 and €500,000

€ 4,8 M + 2.0 x (priority of the excess of loss reinsurance

treaty - € 400.000)

Depends on the

reinsurance

deductible

* Plus additional technical requirements URDG 758

Bank guarantees are required from ‘Transitional’ and

‘Monitored’ Bureaux in various amounts:

COUNCIL OF BUREAUX

As we conclude…

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COUNCIL OF BUREAUX

Meet Quick and Flupke

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COUNCIL OF BUREAUX

Meet Quick and Flupke

36

OR ?

COUNCIL OF BUREAUX

The ‘business’ of promise and trust

▪ Insurance is a business based on a promise

▪ Green Card is a system based on trust

PROMISE + TRUST =

37

COUNCIL OF BUREAUX




PROMISE + TRUST =

38

COUNCIL OF BUREAUX




PROMISE + TRUST =

39

COUNCIL OF BUREAUX




40

PROMISE + TRUST

+ FINANCIAL STABILITY=


Questions ?


Thank you for your attention!

www.cobx.org

42

http://www.cobx.org/

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