{"id":12775,"date":"2023-10-16T11:17:48","date_gmt":"2023-10-16T10:17:48","guid":{"rendered":"https:\/\/p-i7kp07.project.space\/?p=12775"},"modified":"2023-10-16T11:18:34","modified_gmt":"2023-10-16T10:18:34","slug":"spain-property-insurance-market-stricter-interpretations-of-precaution","status":"publish","type":"post","link":"https:\/\/trustrc.com\/en\/spain-property-insurance-market-stricter-interpretations-of-precaution\/","title":{"rendered":"Spain \u2013 Property Insurance Market \u2013 Stricter Interpretations of Precaution"},"content":{"rendered":"

The ongoing global trend towards further tightening of the property insurance market due to factors such as geopolitical risks, inflation, and natural disasters is also widely observed in the Spanish property insurance market. Particularly, rising claim costs resulting from climatic events such as droughts, wildfires, extreme temperatures, or flooding are expected to contribute to no relaxation in both worldwide and national markets.\u00a0<\/em><\/p>\n

For risks in Spain, our long-standing network partner, IberAssekuranz<\/a>\u00a0observes an increasingly stringent interpretation of contractual obligations and clauses in all local property policies. This applies regardless of whether they are purely local contracts or part of an international program’s fronting policies.<\/em><\/p>\n<\/div>

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In particular, strict applications are affecting the automatic precaution (property) and leeway clause (post-event liability in business interruption), which are intended to accommodate in-year increases in insurance values during the insurance year (e.g., due to inflation, investments, or positive business developments).<\/p>\n

Insured parties must, therefore, be even more vigilant than before in ensuring that the actual investments or gross profits (analogous to \u00a7 9FBUB) for the current insurance period are communicated to the insurer. The deadlines and reporting procedures vary depending on the policy and insurer. In essence, it is advisable to provide up-to-date figures ideally before the due date, but at the very least shortly after the renewal, or during the year in case of changes in the risk situation.<\/p>\n

Should the insured party fail to report the current insurance sums within the deadline, corresponding precaution and post-event liability clauses are automatically suspended. This means that in the event of a claim, only the sums documented in the policy are insured without any precaution. The insured party may then quickly fall into underinsurance.<\/p>\n

The situation becomes particularly problematic if the presently documented insurance sums were determined or established in the past. In the case of business interruption, waiting periods of 24 or 36 months significantly exacerbate the issue.<\/p>\n

Example of business interruption claim handling:<\/span><\/strong><\/h4>\n

Renewal documentation issued as of January 1st, 2023<\/p>\n

Annual Gross Profit insured: \u20ac100,000,000 (based on audited business year 2021)<\/p>\n

Period of indemnity: 24 months<\/p>\n

Leeway Clause: +20% (+\u20ac20,000,000 annually)<\/p>\n

This value must be communicated to the insurer within the following 30 days after the next renewal<\/p>\n

“Real” Gross Profit figures based on:<\/p>\n

Business Year 2022: \u20ac108,000,000<\/p>\n

Budget figures 2023: \u20ac116,000,000<\/p>\n

Budget figures 2024: \u20ac124,000,000<\/p>\n

PD\/BI loss as of July 1st, 2022, being a proportional and easily calculated BI:<\/p>\n

2022 (50%): \u20ac54,000,000<\/p>\n

2023 (100%): \u20ac116,000,000<\/p>\n

2024 (50%): \u20ac62,000,000<\/p>\n

SUM: \u20ac232,000,000<\/p>\n

Case 1) The communication of actual figures has been done in time<\/strong><\/p>\n