Proposed Changes to the Spanish Extraordinary Risk Surcharge Regime
Two draft Spanish resolutions were recently released proposing significant changes to the filing requirements and reductions in the rates of Extraordinary Risk contributions due to the Consorcio de Compensación de Seguros (CCS). The draft resolutions will be reviewed for approval in the coming months. The changes to rates are expected to be effective from mid-2018 and new filing requirements are likely to be implemented in time for the January 2019 declaration period.
Changes to Filing Requirements
The CCS has not made any significant changes to its collection procedures since 2004 and has now decided that, due to advancements in technology and improvements to software, insurance companies should be able to share information more efficiently. The CCS should, therefore, be in a better position to collect detailed policy information and identify values and locations of risk on a monthly basis, rather than annually as is the current process.
Amongst the main changes are:
- Simplified returns, where nil submissions are not required
- An amended process for recovering credits due on cancelled or reduced risks, allowing certain refunds to be recovered through the monthly declaration
- The obligation of insurance companies to submit a monthly report of policy information where extraordinary risk surcharges are being collected. This will be submitted alongside the relevant return.
We understand that additional draft legislation will be issued to address any uncertainties including the treatment of co-insurance policies, i.e. who bears the obligation.
Extraordinary Risk Rate Changes
The CCS has reviewed their capital reserves in comparison to their exposure to risks which has been declining significantly in the last few years. As a result, the proposed rate changes will reduce surcharges due on accident, property damage and business interruption risks.
The rate decrease will improve the competitiveness and encourage the wider use of insurance products in Spain.
These changes come a year after the CCS reduced the rates due on motor insurance contracts.
Amended Clause to be Included in Policy Documents
The CCS indemnity clause is due to be updated. When the draft resolution is passed, insurance companies will need to update their contracts to include the updated clause which will be available on the CCS website.
Once the laws have been passed, we will provide further updates for our clients. If you require any further information in the meantime or have any questions in this regard, please do not hesitate to contact your Client Team.