Extraordinary Risk Insurance Spain
Senior Advisor in Sustainability with a focus on Climate Policies and Actions. Awarded as the number 1 Social Media Influencer in Europe in 2022 and 2023(Energy, Climate, Sustainability, Food)
Seguro de Riesgos Extraordinarios provides a unique model for covering extraordinary risks, including those linked to climate change, through a public-private scheme led by the Consorcio de Compensación de Seguros (CCS). This system, which has been in place since 1954, is particularly well-regarded for its resilience and adaptability to emerging risks, such as those posed by increasingly severe climate events.
Here’s how it currently works:
1. Scope of Coverage
The CCS covers damages from extraordinary risks, including natural disasters like floods, earthquakes, volcanic eruptions, and other extreme weather events often intensified by climate change.
It also covers political or societal risks, such as terrorism or civil unrest, making it more comprehensive than many other national systems.
2. Automatic Inclusion and Premiums
Unlike standard insurance, coverage under CCS is automatically bundled with most private insurance policies for properties, vehicles, and personal injury.
A small surcharge on these insurance premiums goes directly to the CCS, creating a large, diversified fund ready for rapid response to disasters.
3. Funding and Stability
The CCS is financially robust. Its structure ensures contributions are continuously collected through policyholders’ surcharges, creating a stable reserve fund that isn’t directly reliant on government funding.
This fund stability allows CCS to respond quickly and extensively to large-scale disasters without additional budgetary allocation.
4. Response to Climate Change
Spain is especially prone to climate-related events like floods and droughts. The CCS has been adapting by strengthening its disaster modelling and forecasting to predict and prepare for these occurrences.
The CCS also promotes resilience by analyzing claims data to inform public authorities and citizens about risks, particularly in high-risk areas, encouraging preventive measures.
5. Claims Process
In a qualifying extraordinary incident, affected policyholders can submit claims directly to the CCS. The process is designed to be efficient, with CCS directly evaluating damages and compensating insured individuals and companies.
This efficiency ensures rapid financial support for recovery efforts, helping communities and businesses bounce back from extraordinary weather events.
Future Challenges and Considerations
As climate risks intensify, the CCS may face pressures to adjust premiums or increase its reserve fund to maintain solvency.
It is also likely to explore further partnerships with other European or global funds to share risk as extreme weather events become more frequent and intense.
Spain’s CCS model is considered a robust and innovative solution, especially as climate risks grow more severe. This framework provides a valuable example for other countries looking to improve climate risk resilience and rapid disaster response through insurance.
Spain’s CCS is unique in mandating automatic coverage for extraordinary risks, pooling premiums to create a self-sustaining fund, and offering direct compensation after natural or extraordinary events.
Other Southern European countries mostly rely on voluntary private insurance, ad hoc government assistance, or EU funds, which makes them more vulnerable to delays and potentially underinsured in the face of climate-related events.
Spain’s model stands out as an innovative approach to climate resilience, and it is increasingly seen as a model other nations may consider as climate-related risks continue to escalate.
