Spain: Consorcio charges

Following a recent tax audit of Lloyd’s by the Consorcio authorities in Spain, the Lloyd’s Tax Department will provide the market with some information on the Consorcio and how their charges affect business written by Lloyd’s underwriters.

Who are ‘Consorcio’?

The Consorcio de Compensacion de Seguros (CCS) is a public business organisation in Spain and was first established in 1941 to support the Spanish insurance market with losses incurred from the Civil War (1936-39). Today, the main task of the CCS is to effectively act as a catastrophe insurer, compensating losses arising from a number of natural perils (e.g. floods, earthquakes) and socio-political risks (e.g. terrorism) which occur in Spain.

The Consorcio paid €541m for losses which arose from Storm Klaus in 2009 and, in 2016, compensation damages for floods amounted to €120m, with two-thirds of total claims paid out of the Consorcio charge for extraordinary risks.

The CCS is financed entirely by its premiums and a series of mandatory surcharges on insurance policies covering risks located in Spain. These are referred to as ‘Consorcio charges’. Insurance entities are required to collect the Consorcio charges from the insured and settle them to the CCS. Lloyd’s collects and settles three different charges to the CCS.

Consorcio charge for extraordinary risks

The Consorcio charge to fund the insurance of extraordinary risks is mandatory for the following types of insurance:

(a) Property cover

• Property multi-risk
• Fire and natural perils
• Motor vehicles (damage and liability)
• Railway rolling stock
• Other damage to property (theft, plate glass windows, machinery breakdown, electronic equipment and computers, damage to completed civil works)
• Business interruption (other financial losses)

(b) Personal cover

• Life policies (in those contracts covering, exclusively or mainly, the risk of death, including those which also provide monetary compensation for permanent or temporary disability)
• Accident policies (in those contracts covering the risk of death or monetary compensation arising out of permanent or temporary disability)

The rates applicable to the various types of insurance are detailed in the DGS Resolution of 27 November 2006, which has been recently updated. An English translation is available.

In addition, policies subject to the Consorcio charge to fund the insurance of extraordinary risks must insert the official Consorcio clause. This clause sets out the extraordinary events which are covered by the Consorcio together with the exclusions and the procedure to be followed in case of loss covered by the Consorcio. Please refer to Crystal for more information.

Consorcio charge to fund the winding up of insurance companies

A 0.15% mandatory charge is applied to the gross premium for all insurance policies (except life insurance, export credit insurance on behalf of or with the support of the State, insured pension plans and reinsurance). As is the case with all Consorcio charges, the charge is collected from the insured and paid to the CCS by the Lloyd’s Tax Department. Please refer to Crystal for more information.

Consorcio charge to fund the National Guarantee Fund (Motor)

This 1.5% Consorcio charge is applied on all motor third party liability insurance policies and applies to the gross premium. For combined policies, the premium should be allocated between the different elements of the risk and the charge applied to the third party liability element only. The Consorcio acts as the National Guarantee Fund to provide compensation for damages caused by unknown, uninsured or stolen vehicles. Please refer to Crystal for more information.