Financial Criteria for Monitored Members - Bosna RE

Council of Bureaux
Conseil des Bureaux
Financial Criteria for Monitored
Members
Kerstin Fabel
Manager Operations & Financial Analysis
Marc Henry
Reinsurance Advisor
Sarajevo – 24th April 2008
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Objectives
• Free flow of cross border traffic
• Guaranteeing compensation
of “domestic” victims of accidents
caused by “foreign” motorists
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Basis
• Based on the national law in each Member
Country
• Bureaux process and pay claims against
foreign motorists
• Then seek reimbursement from foreign
bureaux
• Bureaux are authorised by their
Governments to fulfil these tasks
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CoB History- The 50’s
Founder members 1949:
Belgium, Switzerland, Czech Rep., Denmark, France, Finland, U.K.,
Greece, Ireland, Luxembourg, Norway, The Netherlands, Sweden, Slovakia
1951 First plenary meeting of the Council
1953 Implementation of the Green Card System on the
1 st January 1953.
1959 Introduction by the Council of Bureaux, at the
request of ECE, of a model form of Agreement
between individual Bureaux, to facilitate the abolition
of the presentation of Green Cards.
Members entering in the 50’s:
Austria, Germany, Spain, Italy, Portugal, Poland, Yugoslavia
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CoB History- The 60’s
1965 Decision to extend the territory of the Green Card
System to certain countries outside Europe.
Members entering in the 60’s:
Hungary, Israel, Morocco, Romania, Tunisia, Turkey
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CoB History- The 70’s
1972 Adoption of the European Union Council Directive on
the approximation of the laws of the Member States
relating to insurance against civil liability in respect of
the use of motor vehicles. By this Directive control of
Green Cards for vehicles normally based in a Member
State of the European Union entering the territory of
another Member State, was abolished.
Members entering in the 70’s:
Iran, Bulgaria, Iceland
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CoB History- The 80’s
1984 Consolidated Resolution of the Economic
Commission for Europe on the Facilitation of Road
Transport.
Members entering in the 80’s: Malta
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CoB History- The 90’s
1991 Signature by nineteen Bureaux of a Multilateral
Guarantee Agreement, based on the European Union
Council Directive of 1972 and subsequent Directives,
which unified and replaced pre-existing bilateral
Agreements supplemental to the Uniform Agreement
1994 Creation of Transitional Membership for all new
Members accepted by the Council.
1997 Transitional Membership Financial Guarantees
“Criteria”
Members entering in the 90’s: Albania, Andorra, Bosnia-Herzegovina,
Cyprus, Estonia, Croatia, Latvia, Moldova, FYROM, Slovenia, Ukraine
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CoB History- The 00’s
2002 Internal Regulations adopted at General Assembly
2006 Secretariat services of the Council of Bureaux are
transferred from London to new offices in Brussels.
• Current President : Ulf Blomgren
• Current Secretary General: Alain Pire
Members entering in the 00’s: Belarus, Lithuania
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The Green Card System - 2008
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COB statistics - 2008
• Member Countries: 44
• Population*): 775,000,000
• Number of vehicles*): 325,000,000
• Number of Green Card Claims: 350,000
• Claims handled by Bureaux: 144,000
• Claims handled by Correspondents: 236,000
• 5 countries handle 60% of all claims: France,
Germany, Italy, Spain, United Kingdom
*) Source UNECE Statistics Database
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Monitored Members
• Current
– Bosnia & Herzegovina 2002
– Moldova 1999
– Serbia 2001
– Ukraine 1998
• Previously Monitored
– Belarus ended 2007
– Latvia ended 2002
– Lithuania ended 2007
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Monitoring & Criterias
• Monitored members are
requested to fulfil “Criteria”
Requirements
– Bank Guarantee
– Reinsurance
=> Ensure financial Stability of
the Green Card System, by
providing adequate financial
guarantee
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Criteria: Bank Guarantee
Registered Guarantee or Deposit (€ Million)
vehicles
20 8M+ € 0,2 Per /v above 20 M /vs
Minimum Bank Guarantee:
20 x Priority of excess of loss reinsurance contract
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Criteria: Reinsurance
Requirements
• Maximum Priority : Eur 200 000
• Reinsurers’ Rating :
• Others
– Covers liability of Bureau & member companies
– Exclusions : does not apply if coverage required by law in the country of accident
– Advanced notification to CoB in case of termination
– Access of the CoB to Reinsurers in favour of Handling Bureau
– Reference to Internal Regulations
– Modifications to be approved by CoB
S&P Financial
Strength Rating
A- to AAA OK
BBB- to BBB+ Max 10%, excluding unlimited
BB+ of below
Reinsurer's participation
Not acceptable
The Monitoring Working Group of the CoB ensures that Criteria are met
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Reinsurance Issues
- Different set of exclusion for monitored
members
- Reinsurance structure with low/no risk transfer
- Reinsurance that creates additional liability for
the bureau
For the Renewal as at 01/2008, the
Monitoring Working Group decided to
introduce a set of recommendations
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Recommendations (from
Criteria)
Recommendation N°1 Recommendation N°4
Reinsurance treaty must cover the own liability of Reinsurance treaties must include a provision reflecting that
the Bureau arising from Internal Regulations (i.e. any Amendment/alteration to the treaty must be approved by
green card claims that would fall on the Bureau’s the CoB.
retention).
Recommendation N°2 Recommendation N°5
Reinsurance treaties must include a provision Reinsurance treaties must include a provision reflecting that
reflecting that the contract is to be read in
there shall be no cancellation of the reinsurance contract
conjunction with the Internal Regulations
without the consent of all parties, and in case of cancellation,
CoB must be given at least three months notice of termination.
Recommendation N°3
Reinsurance treaties must include a provision
reflecting that CoB should be the beneficiary of the
contract. This provision is required to ensure that
CoB is entitled to access to the reinsurer in favor of
the Handling Bureau in case the reinsured would fail
to satisfy any reimbursement.
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Recommendations (New)
Recommendation N°6 Recommendation N°9
Reinsurance treaties must be subject to the standard When an annual aggregate limit is provided, in addition to
CoB exclusion clause
reinstatements number, this aggregate limit has to be indexed
according to the stability clause.
Recommendation N°7 Recommendation N°10
Reinsurance treaties must include only free
Time frame:
reinstatements
- 6 weeks prior to inception: Reinsurance terms and conditions
- 3 weeks prior to inception: Reinsurer written shares
- 1 day prior to inception: Signed Lines
Recommendation N°8
The minimum number of reinstatement should be at
least the number of reinstatements in force in the
existing reinsurance contracts.
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Outcome & Outlook
• Outcome
– Ensure adequate protection
– Achieve more uniformity in coverage
– Smooth renewal process
• Outlook
– Terrorism
– Number of Reinstatements
– Level of priority
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Thank you for your
attention !
secretariat@cobx.org
www.cobx.org
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