In worrying news for insurance buyers with operations in Spain, the country's Insurance Compensation Consortium, Consorcio de Compensación de Seguros, or Consorcio, is stamping down on the conditions under which it will pay claims.
According to Marsh, Consorcio, the backstop for extraordinary perils cover in Spain, is increasingly requesting evidence that its charge, premium tax, insolvency levy and total premiums have been paid before the occurrence of a loss. It is reserving the right to reject a claim if these have not been paid in time, the broker adds.
Marsh therefore advises multinational companies and their brokers to agree on the premium allocation well in advance of renewal, or within 30 days after inception for new policies.
“This will ensure the premium, the Consorcio charges and related taxes are billed to and paid by the insurers, to enable them in turn to remit to the Consorcio in time”, said Praveen Sharma, Global Leader of Marsh’s Insurance Regulatory and Tax Consulting Practice.
The Consorcio fulfils several different functions in the Spanish insurance market. Among other things it receives contributions to cover loss or damage caused by a series of extraordinary natural perils and political risks, acts as the guarantee fund to handle any insurance company insolvencies, provides trade credit reinsurance support to the insurance market and acts as contingency insurer for nuclear risks.
“This development is also consistent with other examples of the Spanish tax authorities requesting that multinational companies prove that premium tax and an insolvency levy on premiums relating to risks located in Spain and payable under global programmes—including those covers placed outside Spain (freedom of services, excess liability, directors’ and officers’, crime and other such covers) which are billed to and paid centrally by multinational companies—have indeed been paid on time”, he added.
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