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TERRORISM COVER IN THE CONTEXT OF EXTRAORDINARY INSURANCE RISK

TERRORISM COVER IN THE CONTEXT OF EXTRAORDINARY INSURANCE RISK. TERRORISM COVER. GENERAL FRAMEWORK. Geological NATURAL RISKS Climatic Terrorism Rebellion

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TERRORISM COVER IN THE CONTEXT OF EXTRAORDINARY INSURANCE RISK

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  1. TERRORISM COVER IN THE CONTEXT OF EXTRAORDINARY INSURANCE RISK

  2. TERRORISM COVER GENERAL FRAMEWORK Geological NATURAL RISKS Climatic Terrorism Rebellion Political-social Sedition Risks Uprising Popular Disturbance Actions by Armed Services EXTRAORDINARY RISK SYSTEM OF COVER

  3. BASIC FEATURES OF EXTRAORDINARY RISK COVER • - The risks covered are defined legally. • Cover must be included in ordinary policies for personal • accident insurance and certain sectors of property damage. • Subsidiary action by the “Consorcio de Compensación de • Seguros”. • Compulsory surcharge collected by the entities issuing the • ordinary policy. • - Scope: Spanish territory. • Guarantee conditions: as in the ordinary policy (capital • insured, etc.). • - For property, only direct material damage is indemnified.

  4. LEGAL DEFINITIONS TERRORISM Any violent action intended to destabilise the established political system, or to create fear and insecurity in the social context in which it occurs. POPULAR DISTURBANCE Any group action intended to attack public peace, creating a disruption of order and causing personal injury or property damage.

  5. TERRORISM THE SITUATION FOLLOWING 11 SEPT. AIR NAVIGATION: (Civil liability to non-passengers) ECOFIN authorises support measures through reinsurance for the account of the State SPAIN: Reinsurance for the account of the State, administered by the “Consorcio de Compensación de Seguros”

  6. TERRORISM THE SITUATION FOLLOWING 11 SEPT. TERRORISM REINSURANCE FOR LOST PROFIT, BY THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS” THE CCS-UNESPA AGREEMENT 31-1-2002 COVER FOR ALL POLICIES, AND IN ALL CATEGORIES

  7. EXTRAORDINARY RISKS COVER FUNDAMENTALS SUBSIDIARITY SOLIDARITY MUTUALISATION PRINCIPLES GEOGRAPHICAL COMPENSATION BETWEEN RISKS TIMING COLLABORATION

  8. EXTRAORDINARY RISKS INDEMNIFICATION REQUISITES TO HOLD DAMAGE INSURANCE IN CERTAIN CLASSES COMPULSORY INCLUSION OF EXTRAORDINARY RISKS PAYMENT OF THE COMPULSORY SURCHARGE

  9. CLASSES ACCESSIBLE TO THE “CONSORCIO” FIRES AND NATURAL FORCES, MOTOR VEHICLES (Not Civil Liability), RAILVEHICLES, ROBBERY, BROKEN WINDOWS, BREAKDOWN OF MACHINERY, ELECTRONIC EQUIPMENT AND COMPUTERS, FINISHED CIVIL ENGINEERING WORK, PERSONAL ACCIDENTS

  10. EXTRAORDINARY RISKS PRIVATE COMPANY: If wished, Extraordinary Risks may be covered: - Along with ordinary risk cover. - In a separate policy. INSURER

  11. EXTRAORDINARY RISKS INSURER THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS”: Covered when: - The private company gives no explicit cover. (SUBSIDIARITY) - The private company does provide cover, but cannot meet its indemnification obligations (bankruptcy, temporary receivership, CLEA) (GUARANTEE FUND) THE “CONSORCIO” DOES NOT DIRECTLY UNDERWRITE THE COVER

  12. EXTRAORDINARY RISKS CHARACTERISTICS OF COVER • LEGALLY DEFINED • QUALITATIVE AND NOT QUANTITATIVE: • Not conditioned by territorial extension, by • the number of affected parties, or extensive damage. • AUTOMATIC: • Official declaration as a catastrophic area • is not required.

  13. EXTRAORDINARY RISKS RISKS COVERED NATURAL PHENOMENA EARTHQUAKE SEAQUAKE FLOOD VOLCANIC ERUPTION ATYPICAL CYCLONIC STORM FALLING SIDEREAL BODIES PHENOMENA WITH POLITICAL-SOCIAL EFFECTS TERRORISM REBELLION SEDITION UPRISING POPULAR DISTURBANCE ACTION BY THE ARMED FORCES

  14. EXTRAORDINARY RISKS DIRECT MATERIAL DAMAGE DAMAGE INDEMNIFIABLE LOSSES Salvage EXPENSES Demolition and clearing

  15. GENERAL: 10% loss FRANCHISE (Property Damage) INDEMNIFICATION LARGE CAPITALS: 15% > 1 % of the insured sum NO < 150.25 Euros EXTRAORDINARY RISKS RISKS COVERED: Extraordinary Risks SUM INSURED : That of the ordinary insurance PROPERTY AND PERSONS COVERED: those under the ordinary cover SCOPE OF COVER TERMS INCLUDED OPTIONALLY Included in the ordinary cover: first risks, indemnification limits. Application of the PROPORTIONAL RULE 30 days following the effective date of the policy EXCLUSION PERIOD

  16. EXTRAORDINARY RISKS CLAIM MANAGEMENT • OCCURRENCE Companies C.C.S. • CLAIM • Verification • APPRAISAL Occurrence • Cause covered • DIRECT C.C.S. PAYMENT TO THE INSURED

  17. THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS” EXTRAORDINARY RISKS: COVER FOR TERRORISM AND POPULAR DISTURBANCE PROPERTY DAMAGE - CONSUMPTION OF PREMIUM. ALL CAUSES - AMOUNTS PAID ACCORDING TO CAUSES - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE, ALL CAUSES - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE BY THE YEAR OF LOSS - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE ACCORDING TO RISK TYPE

  18. THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS” EXTRAORDINARY RISKS: COVER FOR TERRORISMAND POPULAR DISTURBANCE DAMAGE TO PERSONS - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE, ALL CAUSES - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE BY THE YEAR OF LOSS - NUMBER OF VICTIMS OF TERRORISM AND POPULAR DISTURBANCE

  19. THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS” EXTRAORDINARY RISKS: COVER FOR TERRORISMAND POPULAR DISTURBANCE THE MOST COSTLY INDIVIDUAL LOSS CAUSED BY TERRORISM Note: - All figures in Euros - All figures updated in Euros to 31-12-2001 PROPERTY AND PERSONAL LOSS - AMOUNTS PAID ACCORDING TO CAUSES

  20. EXTRAORDINARY RISKS: PREMIUM CONSUMPTION, PROPERTY DAMAGESERIES 1971 - 2001ALL CAUSES EXTRAORDINARY RISKS Updated Premiums and Loss Rate 3.000.000.000 2.500.000.000 2.000.000.000 1.500.000.000 1.000.000.000 500.000.000 0 1971 - 1980 1981 - 1990 1991 - 2000 2001 SERIES EUROS Premiums Loss Rate

  21. EXTRAORDINARY RISKS – PROPERTY DAMAGE SERIES 1971 – 2001 (*) Includes former cover for rain, hail, snow and hurricance. (**) Unclassified loss rate for the first years in the series.

  22. EXTRAORDINARY RISKS: PROPERTY DAMAGESERIES 1971 - 2001 EXTRAORDINARY RISKS Property Damage Loss Rate by Cause 9% Terrorism + Popular Disturbance Other causes 91%

  23. EXTRAORDINARY RISKS – PROPERTY DAMAGE. SERIES 1971 - 2001SUMS PAID UPDATED, BY YEAR OF OCCURRENCE EXTRAORDINARY RISKS: PROPERTY Amounts paid (updated), Terrorism and Popular Disturbance 50 40 Millions of Euros 30 20 10 0 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 YEARS EUROS

  24. EXTRAORDINARY RISKS – PROPERTY DAMAGE SERIES 1994 – 2001 UPDATED SUMS PAID, DISTRIBUTED BY RISK TYPECAUSE OF LOSS: TERRORISM AND POPULAR DISTURBANCE UPDATED AMOUNTS PAID SERIES: 1994 - 2001. Percentage Distribution 1% 16% 20% Homes and Communities Offices 8% Commerce and Other, Simple Industrial Automobiles Civil Engineering Work 27% 28%

  25. EXTRAORDINARY RISKS: PERSONAL DAMAGE .SERIES 1987 - 2001 EXTRAORDINARY RISKS: Personal Damage Loss Rate by Causes 10,8% Terrorism + Popular Disturbance Other Causes 89,2%

  26. EXTRAORDINARY DAMAGE – PERSONAL DAMAGESERIES 1987 - 2001UPDATED AMOUNTS BY YEAR OF OCCURRENCE EUROS

  27. EXTRAORDINARY RISKS – PERSONAL DAMAGE SERIES 1994 - 2001 NUMBER OF VICTIMS BY YEAR OF OCCURRENCE OF LOSS CAUSE OF LOSS: TERRORISM AND POPULAR DISTURBANCE

  28. THE MOST COSTLY INDIVIDUAL CLAIM CAUSED BY TERRORISM DATE: 18 April 1982 PLACE: Madrid UPDATED SUMS PAID: 37.331.580 Euros INSURED: Telefónica, S.A.

  29. EXTRAORDINARY RISKS – PROPERTY AND PERSONAL DAMAGE - SERIES 1987 - 2001 EXTRAORDINARY RISKS: Property and Personal Damage Loss rate by Causes 85,4 2,2 Flood 2,7 Terrorism Popular Disturbance 9,7 Rest

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