We act for the protection of cross-border road traffic victims The importance of financial stability of National Bureaux and member companies within the Green Card system Hayk ZAYIMTSYAN Risk and Monitoring Manager Council of Bureaux
The Council of Bureaux Founded in 1949 by 13 countries Functioning under the aegis of UNECE (Geneva) Managing the Green Card System Secretariat based in Brussels Purely technical, not a lobbying and non-political organisation 2
System objectives & CoB mission Facilitating international traffic Protecting victims of international road traffic accidents Mission of the CoB: We act for the protection of crossborder road traffic victims Frontier insurance Green Card or deemed insurance cover in EEA 3
The Green Card system 4
The Green Card system All European countries are member (except Armenia, Georgia and Kazakhstan) Extra-European members are Israel, Iran, Morocco and Tunisia Pending membership requests from Algeria, Armenia and Georgia A very heterogeneous system from cultural, economical, financial, political and legal points of view potential frictions and complexity 5
The Green Card system Insurer A Insurer B Insurer C Insurer α Insurer β Insurer γ Green Card Bureau Green Card Bureau Green Card Bureau Green Card Bureau Green Card Bureau 6
The Green Card system Each member country has an independent Bureau authorized to issue Green Cards The Bureau of the country visited secures that eventual claims are handled according to local law (= Handling Bureau) The Bureau, under the authority of which the Green Card has been issued, guarantees that the Handling Bureau is reimbursed under all circumstances (= Guaranteeing Bureau) 7
The Green Card : specimen
Cross-border accidents Germany Czech Republic
Cross-border accidents Germany Czech Republic German driver is liable
Cross-border accidents Germany Czech Republic Payment of reimbursement Claim Payment German insurer Claim handler Reimbursement demand 11
What happens if The insurer fails to pay on time or is insolvent The liable driver / vehicle is uninsured The liable driver / vehicle is unidentified or untraced (hitand-run) The Green Card is false or unauthorised 12
Cross-border accidents: GCBx Insurer default (failure to pay in time) Insurer insolvency Germany Czech Republic NO payment of reimbursement Claim Payment German insurer Claim handler Reimbursement demand pending 13
Cross-border accidents: GCBx Cross-border uninsurance (EEA+Switzerland+Andorra+Serbia) False Green Cards Germany Czech Republic Claim Payment Payment of reimbursement Reimbursement demand 14
The financial burden on Bureaux Green Card Bureaux may step in to compensate victims or reimburse claim handlers Green Card Bureaux may have to step in as guarantor of their members obligations Green Card Bureaux can be the ultimate paying entity in certain cases: Insurer insolvency (depends on national legislation) Uninsured driving / hit and run ( EEA+ ) False Green Cards Green Card Bureaux are financed through contributions from their members, usually in % of premium (GWP). Is this always enough? 15
The Green Card system 48 countries / 47 Bureaux Over 500 million registered vehicle fleet * Up to 500 000 cross-border accidents annually ** 1500+ insurers issuing Green Cards *** * Data from CoB Member Bureaux and other sources, 2013-2016 ** estimate, 2018 *** CoB data, 2017 16
The Green Card system More than 1 000 cross-border accidents per day Multiple stakeholders and involved parties: Insurers Claims handling offices Bureaux Complex cross-border cash flows constantly, which do not match in time and space liquidity and solvency critically important at all times and on all levels 17
Statistics: geography of accidents 18
Statistics: geography of accidents 19
Statistics: geography of accidents 20
Statistics: geography of accidents Largest Green Card accident exporters Indiv. net balance ~ 35 000 accidents: 2013: one Bureau 2017: four Bureaux Aggregate net balance system-wide: 2013: 125 000 accidents 2017: 160 000 accidents Source: Handling Bureaux statistics 21
209,098 520,134 563,106 680,936 803,199 1,081,194 1,330,551 2,100,000 2,345,387 3,300,434 7,010,608 8,172,948 21,090,424 33,300,000 Statistics: Moldova and the region The South-Eastern region in the context of the Green Card system (CoB classification): 14 countries AL, AZ, BG, BiH, CY, GR, IL, IR, MD, MK, MNE, RO, SRB, TR A mix of EEA Members (MA signatories) and pure Green Card countries Over 80 million vehicle fleet (ca. 15% of the whole system) Number of registered vehicles 75,000,000 7,500,000 750,000 Data for 2016 Source: CoB Member Bureaux LOG scale for registered vehicle fleet 75,000 MNE MK AL CY MD BIH AZ IL SRB BG RO GR TR IR 22
15.7 78.5 172.8 165.6 5,509.1 3,692.1 2,574.5 2,536.4 2,236.0 20,800.0 15,451.0 81,196 209,098 317,000 358,947 518,281 2.42 0.55 0.41 14.83 13.99 11.16 26.27 38.29 35.36 35,555,062 38,138,000 41,000,000 57,100,000 63,000,000 49.64 Statistics: Moldova and the region Number of registered vehicles Green Card gross written premium, EUR Mio 75,000,000 60.00 50.00 40.00 7,500,000 30.00 20.00 750,000 10.00-75,000 MTPL gross written premium, EUR Mio 10,000.0 1,000.0 Source: CoB Member Bureaux Data for 2016 (except vehicle fleet data for GB, F) LOG scale for vehicle fleets and MTPL GWP MTPL GWP missing for: GB, I, MA, IL For BiH and MNE, GC premium is included in MTPL 100.0 10.0 23
Statistics: Moldova and the region Green Card accidents Estimated up to 19% of all Green Card accidents annually exported from SER countries Estimated around 6% of all Green Card accidents annually imported to SER A large number of accidents from SER occur in high indemnification countries (Italy, Germany, France, UK ) >> much larger frequency of accidents compared to fleet (especially considering the specificity of pure GC countries) >> most countries are net exporters of accidents >> not only more accidents, but also more expensive claims 24
Statistics: Moldova and the region Online Guarantee Calls Around 45% of the guarantee calls are issued to SER Bureaux; around 22% (27% in amounts) by SER Bureaux Growth in OGCs is higher for SER compared to system OGC frequency per accident: in some countries higher than average >> OGC = reimbursement demand unpaid by insurer (as a rule) >> bigger share of OGCs than vehicle fleet / number of GCs larger amounts of OGCs faster growth in OGC numbers / amounts 25
Statistics: conclusion Financial stability is a major challenge for the Green Card system as a whole: More than 1 000 cross-border accidents per day Multiple stakeholders and involved parties: Insurers Claims handling offices Bureaux Complex cross-border cash flows constantly, which do not match in time and space liquidity and solvency critically important at all times and on all levels 26
Statistics: conclusion Financial stability is a major challenge and even more so for the CEE region: The region is an above average risk (Green Card accidents exported vs. share of vehicle fleet) Most countries are net exporters of accidents: this puts additional indirect pressure on the solvency / liquidity of Bureaux, insurers, and claims handlers Larger exposures due to circulation in high indemnification level countries Less financial discipline? (OGC statistics) 27
Financial stability: markets / insurers Premiums Single premium vs. domestic MTPL + Green Card Traffic geography: countries of circulation of vehicles Reversed production cycle cash management WILL NOT work Long-tail business Competitive vs. actuarially justified premiums Reserves (provisions) and investments Adequacy of amounts Timely communication of changes in reserve advice Long-tail business BUT constant liquidity needs 28
Financial stability: markets / insurers Portfolios: negative selection Trucks, buses etc. severity of claims (Other) commercial fleet frequency of claims Country of registration vs. country(ies) of circulation of vehicles Insolvencies Claims handling entities experience financial strain, as recoveries from the (potentially) insolvent insurer become difficult Regional inter-relations and the possibility of a domino effect An extra financial burden on the Bureaux (eventually, the whole market) 29
Financial stability: Bureaux / CoB Financing of the Bureaux by member insurers Monitoring of insurers financial stability by Bureaux Reinsurance subscribed by insurers Additional financial guarantees from under-performing insurers towards Bureaux Constant risk monitoring of Bureaux / markets / whole system Online guarantee calls (volumes and payment speeds), system-based financial stability indicators, market and supervisory data Dedicated follow-up of some individual Bureaux / markets Market and supervisory data, published financial reports, Bureau-specific reporting requirements, worst-case scenario analyses, etc. Reinsurance subscribed by Bureaux Required for Transitional and Monitored Bureaux, voluntary for all other Members Additional financial guarantees from under-performing Bureaux (markets) towards the CoB 30
Reinsurance Reinsurance is purchased By primary insurance companies CoB not involved By Bureaux for their own risks only uninsured driving, false green cards, bankruptcy of members Example: CoB Excess of Loss programme By Bureaux for the whole market All foreign claims, including those of insurers Required for Transitional and Monitored Bureaux or not risks are transferred to the market 31
Reinsurance: map 2017 Market cover (all vehicles abroad) Individual cover (uninsured / false GC) CoB XL cover (uninsured / false GC) Risk retained or transferred to market 32
Bank guarantee Bank guarantees are required from Transitional and Monitored Bureaux in various amounts: Registered Vehicles (Million) Guarantee or Deposit ( Million) <1 1M 1-5 1 M+ 0.5 per vehicle above 1M vehicles 5-10 3 M+ 0.4 per vehicle above 5M vehicles 10-20 5 M + 0.3 per vehicle above 10M vehicles >20 8 M + 0.2 per vehicle above 20M vehicles Depends on the vehicle fleet Depends on the reinsurance deductible Priority of the Excess of Loss Reinsurance Treaty Equal or less than 200,000 Between 200,001 and 300,000 Between 300,001 and 400,000 Between 400,001 and 500,000 Minimum amount of Bank Guarantee or Cash Deposit 20 times the priority 4 M + 5.0 x (priority of the excess of loss reinsurance treaty - 200.000) 4,5 M + 3.0 x (priority of the excess of loss reinsurance treaty - 300.000) 4,8 M + 2.0 x (priority of the excess of loss reinsurance treaty - 400.000) * Plus additional technical requirements URDG 758 33
As we conclude 34
Meet Quick and Flupke 35
Meet Quick and Flupke OR? 36
The business of promise and trust Insurance is a business based on a promise Green Card is a system based on trust PROMISE + TRUST = 37
The business of promise and trust Insurance is a business based on a promise Green Card is a system based on trust PROMISE + TRUST = 38
The business of promise and trust Insurance is a business based on a promise Green Card is a system based on trust PROMISE + TRUST = 39
The business of promise and trust Insurance is a business based on a promise Green Card is a system based on trust PROMISE + TRUST + FINANCIAL STABILITY = 40
We act for the protection of cross-border road traffic victims Questions?
We act for the protection of cross-border road traffic victims Thank you for your attention! www.cobx.org 42