There is a more or less apocryphal legend which suggests that the ironic aphorism “may you live in interesting times” originates from a 17th century Chinese curse. Whatever its source, the fact is that the present at the Consorcio de Compensación de Seguros (CCS), both for the institution and those who are part of it, has been an almost continuous stream of “interesting times” over the past few months, from a succession of very significant loss events — starting with the cut-off low of September 2019 (which was the inspiration at the heart of the previous edition of our magazine) and ending with the low-pressure area known as Storm Gloria in January 2020 — to the crisis triggered by the global COVID-19 pandemic, which has brought new challenges for both the CCS in particular and society at large since March 2020. Over the next few lines, we describe our experience over these past few months at the CCS and what measures we have taken to ensure that we can always keep providing the solution that insured people and companies in Spain deserve.
Together with 2009 and 2011, 2019 was one of the three most unique financial years for the CCS in these two decades of the 21st century.
The special nature of 2009 was due to extraordinary wind events: let us recall that the year opened with the biggest windstorm in the history of the CCS (Cyclone Klaus in January) and the strictly urban tornado which hit the city of Malaga in February, this being similarly the most serious in our experience. The two events led to more than 281,000 wind losses at a cost of 515 million euros (M€).
The second special year was 2011 on account of the Lorca earthquake of 11 May. This was the most devastating earthquake which we have had to deal with, which in short produced 33,000 losses and a pay-out of some 487 M€ in compensation to those insured.
Irrespective of the numerous bouts of extraordinary wind storms, we can in fact claim that 2019 owed its exceptional nature to what has always been held to be the “star” among the risk covered by CCS: flooding.
2019 saw the flood with the largest number of claims in the whole of the 66-year history of the CCS as an insurer of catastrophe risk. The cut-off low (or closed upper-level low) which basically, though not exclusively, struck southern and eastern Spain in September 2019, prompted 69,500 claims that had to be handled by the CCS and cost over 460 M€.
Although what happened in September was in itself enough to label the financial year experienced by the CCS as exceptional, two further, highly significant, aspects must also be mentioned to give a good idea of the intensive and sustained effort which our organisation had to make over that particular period.
On the one hand, the cut-off low in September 2019 was preceded by a flurry of summer floods, which meant that when it arrived the network of partnering adjusters and claims handlers at the CCS was fully occupied with dealing with these floods.
The floods in the middle zone of Navarre (mainly Tafalla, Olite, Pitillas and Pueyo) from torrential rains and the overflowing of the river Cidacos shook the inhabitants of a geographical area, who were unaccustomed to events of this kind. Losses generated over 2,000 claims, many of them involving very severe damage, and compensation paid out of more than 25 M€.
These floods were followed by several summer storms in Barcelona and northern Tarragona between 16 July and 15 August, which gave rise to over 2,300 claims at a cost of 7 M€.
Immediately afterwards, in the last third of August, successive floods occurred in Alicante (more than 1,200 claims costing 3 M€), Madrid (floods in Arganda and Fuenlabrada, with 3,000 claims and damage of over 10 M€) and Toledo, the Balearic Islands, Murcia and Castile León (1,400 claims and 3.6 M€ in damage).
To sum up, the prelude to September’s cut-off low comprised a whole host of some 10,000 losses that happened in the weeks leading up to it at a cost of 50 M€.
On the other hand, the cut-off low was followed by a four-month period from October 2019 to January 2020 of constant flood, including coastal floods and wave battering effects, with Catalonia being hit by another cut-off low in October, bringing almost 6,000 claims at a cost of 49 M€.
Following this, a third cut-off low entailing less serious consequences affected a large part of the Levant, prompting 1,350 claims and compensation pay-outs totalling 6 M€.
On top of this, in December, floods arose in a broad dispersion of places such as Reinosa, in Cantabria, and several locations in the provinces of León, Palencia, A Coruña, Pontevedra, Cáceres (the river Jerte burst its banks), Cordoba and Jaén on account of Storms Daniel, Elsa and Fabien, which together generated 6,000 claims at a cost of 38 M€.
The run ended with the devastating “Storm Gloria” in January 2020, which has thus far brought 16,000 more claims costing an estimated 165 M€.
In round numbers, there were almost 30,000 more claims immediately after the September cut-off low, which cost approximately 260 M€.
As a result, the CCS has made a sustained effort over several months to process more than 110,000 claims costing a combined 770 M€, of which around 70,000 claims and 460 M€ concern the central element in the period, namely the historic cut-off low of September 2019.
It is self-evident that a high-impact loss rate such as that which took place in 2019 forced the CCS to take exceptional organisational measures to be in a position to provide a swift service to protect the insured victims in their thousands. We can encapsulate how the handling of compensation was reinforced in five aspects.
Firstly, the September cut-off low put the system for receiving compensation claims and recording them digitally to the test. On 20 September 2019, the CCS received and logged the record figure of 9,960 claims filed in a single day via the institution’s call centre and website. The CCS also provided the insured with the chance to file their claims by phone and directly on the premises offered by the council of the worst-hit municipality in the Murcia region (Los Alcázares).
Secondly, the cut-off low put strain on the institution’s adjustment service capability: the CCS deployed a little over 400 loss adjusters (another historical record) to appraise insured damage. The scattering of losses over such a wide area also represented another challenge.
Thirdly, given that there were almost 70,000 claims, the CCS started up an original “universal” shared claim management system among all the handling teams from the headquarters and every one of its 17 territorial offices. On the other hand, the CCS centralised the perennially and especially delicate task of dealing with personal injuries from the floods using an ad hoc team of handlers to enable the relatives of the deceased to receive priority and wholly personal care.
A fourth aspect is that the CCS asked every insurer to designate somebody to act as a point of contact with the CCS and both provide documentation and clear up queries, thus avoiding the need to approach insured catastrophe victims. The willingness and speed of action of these contacts deserves special mention here, as does the smoothness of cooperation between the insurers and the CCS, all of which redounded to the benefit of the insured in common to the two parties.
Finally, the CCS sanctioned specific criteria to assess losses and handle claims that were tailored to match the exceptional magnitude of the flood and to safeguard the interests of those insured.
Given the harshness and intensity of the six months from July 2019 to January 2020, it is only fair to stress how the sustained effort which the CCS invested as an organisation was at all times met with very steadfast understanding and collaboration on the part of the insurers and insurance agents and brokers, as well as the associations representing them. This attitude was further proof of the merits of public-private partnership, which is the hallmark of Spain’s insurance system.
Even so, over the first few weeks of 2020 it became evident that another problem on a hitherto unheard of scale was increasingly taking centre stage: the spread of the SARS-CoV-2 virus and its manifestation in the form of the disease COVID-19. With the declaration of a state of emergency on 14 March and the imposition of a lockdown to limit the spread of the disease, the activity of the CCS as well as the whole of society has been hampered and equally extraordinary measures have had to be taken. We can divide these measures into two blocks: firstly those which the CCS has taken to provide support for the insurance industry and the insured in this situation, and secondly those which the CCS has taken to ensure the continuity of its services.
Within the first block, the initial measure came in the form of a decision by the presidency of the CCS to make an exception throughout the duration of the state of emergency and up to one month afterwards, whereby the rules have been changed to allow insurers to postpone payment of the extraordinary risk surcharges on policies renewed during this period. This means that the facilities for paying the insurance premium which insurers might grant to their insured to alleviate any liquidity problems which they could experience on account of the pandemic are being backed up by the CCS by extending the facility to payment of the loading included in the insurance premium receipt.
At the same time the decision stipulates that for the duration of the exception period the postponement or splitting up into instalments of payment for premiums and loading in favour of the CCS shall not be grounds for it turn down claims. In cases where there is doubt in the course of handling compensation pay-outs as to whether the postponement of paying the premium and the loading derives from a facility granted by the insurer in the context of the pandemic or is by reason of failure to comply with their obligations on the part of the insured outside the context of the exception, the CCS can quickly clarify any queries via its previously mentioned network of effective contacts designated by the insurers.
Beyond this measure, which will be very short-lived, the CCS has been authorised by the Government under a Royal Decree-Law to provide re-insurance for credit insurance. This measure increases the likelihood of entrepreneurs who sell their products on credit being able to find insurance cover in the market when they would not otherwise be able to do so via the companies that provide such insurance due to the strains on the economy which the pandemic is causing. The measure is essentially directed at removing obstacles to financial transactions and endowing business arrangements with security. It is an instance of the kinds of temporary support measures for the industry “under circumstances when the market needs it” that is described in the Legal Statute of the CCS and which was already resorted to in 2009 in the context of the economic crisis which emerged from 2007-2008 onwards.
In the context of the second block, the CCS has benefited from its substantial progress in implementing its digital transformation plan by having its entire complement of staff working remotely within record time. This is to the extent that the number of settled claims in April was similar to the figure for previous months, which were very busy. Under these digitised procedures, claims are filed with the CCS by the insured (or via either insurance companies or brokers acting on their behalf or insurers) by ringing the CCS call centre or over the internet using our entity’s website. They are then prepared for immediate and orderly distribution to adjusters using a system that geo-references the location of the case affected by the extraordinary risk. Delivery of the vast number of valuation assignments to adjusters is performed on a web-based communication platform through which the adjusters submit their report and the digitised insurance contract. In this way the final handling procedure for adjusted claims is managed via a system that is shared among all of the handling teams at the 17 territorial offices and in the central services area of the CCS.
The system has basically enabled all claims to be managed remotely by all of the handlers from the first day when the CCS decided to suspend work at its offices and all of its employees subsequently left them.
Simultaneously, and for identical health and safety reasons, the CCS suspended adjustment in situ and replaced it with remote or video adjustment. Using this system, the CCS has continued to handle claims processes that had already been begun by adjustment on location prior to the declaration of the state of emergency and has started handling work on a new flood (on the coastal zone of the province of Castellón and which occurred between 31 March and 1 April) which has triggered 2,000 claims that are being remotely adjusted and handled in their entirety.
After much suffering and sacrifice by many sections of the society in which we live, most particularly, the healthcare sector, it is making good progress towards overcoming the pandemic and along the road to recovering the levels of economic activity which we saw before. As ever, the CCS wants to be a part of the solutions that help society negotiate this awkward and uncertain path.