It is sad, but industrial accidents, social disasters and other disasters continue to occur on our planet, and it has long been clear to everyone that billions of rubles are needed to eliminate the consequences of such events. No insurance company can have sufficient financial potential for this and cannot alone render assistance to the affected company. In this case, the legislation provides for the creation of insurance pools that combine financial resources and share responsibility between participants. Let's talk in more detail about what it is and how the activities of such associations are carried out.
What does this concept mean?
An insurance pool is an association of insurers that does not have the status of a legal entity. The basis for the creation of such an association is an agreement between the parties, concluded in order to ensure the financial stability of insurance operations. The guarantor of such stability is the joint liability of all insurers for the fulfillment of insurance obligations specified in the contract concluded on behalf of all parties to the agreement.
When insuring such large enterprises as nuclear power plants, aerospace companies or factories with environmentally hazardous technologies, the cost of insurance risks, namely accidents requiring compensation for damage, is very high.
The insurance pool operates in accordance with the constituent documents, which are signed by all participants.
Too much spending
How much financial resources should the heads of the power plant spend in the event of an accident and hundreds, or even thousands of injured people? How much does it cost to recover from a plane crash? It is clear that in such situations there will be big financial losses. When concluding an insurance contract, organizations express their willingness to pay significant contributions - this is beneficial for insurers. But such payments after disasters are impossible for one insurance company, they will ruin it. For these reasons, supervisors give permission to conclude contracts only if the size of the risk payments is not more than 10% of all the financial resources of the company. In order to be able to share responsibilities in the field of insurance of large risks, insurance pools and voluntary unions for large-scale transactions are being created.
Purpose of creation
The purpose of the formation and operation of the pool involves joint activities in the field of insurance and reinsurance of similar objects in accordance with unified rules and tariffs.
The creation of insurance pools pursues the following goals:
- ensuring financial stability of certain types of insurance;
- increase in the volume of small financial capacity;
- the opportunity to participate in major risks;
- ensuring the possibility of insurance payments to participants in the event of major risks.
In Russia
Insurance pools in Russia are a relatively new phenomenon, while Europeans used this form in the early twentieth century. For the first time such associations appeared in the field of aviation insurance in England and Germany. In the middle of the 20th century, the threat of terrorist acts and technological disasters increased, which in turn increased the demand for insurance services with a large size of payments, and the number of insurance pools increased accordingly.
Legislation
The formation and operation of insurance pools in our country is carried out in accordance with the law “On the organization of insurance business in the Russian Federation”.This normative act permits and regulates the process of creating and operating insurance and reinsurance pools. It also establishes the possibility for carrying out activities based on a simple partnership agreement without registering a legal entity. After the agreement on the creation of the insurance pool is signed by all participants, it is necessary to notify the supervisory authorities about this. Often, such pool agreements may be of interest to antitrust authorities and become the subject of their investigation. In the Russian Federation, the law governing insurance issues was first adopted about twenty years ago. Not so long ago, in 2016, a new edition of the above federal law was released. In Art. 14.1 of this legislation refers to insurance pools.
Areas in which pooling is allowed
Areas in which their creation is legally permitted are: aviation and space industry, environmental disasters; accidents at nuclear power plants; damage caused by the use of medicines, large-scale construction, the supply of agricultural products that are harmful to health, terrorist acts. The main objective of such an association is to prevent the ruin of individual insurance companies in the event that payments under insurance contracts may exceed financial capabilities.
Creation Examples
For clarity, we give examples of such pool associations:
- Creation of an aerospace insurance pool. Designed for risk insurance in the field of aerospace activities.
- The creation in 2001 of the Russian anti-terrorism insurance pool (RATSP). It assumes insurance of risks associated with terrorist acts and sabotage.
- Russian nuclear insurance pool. Formed to insure the risks associated with the activities of nuclear power plants. Governing body - the Supervisory Board, which acts on the basis of the relevant regulations on it. The composition includes the first leaders of the pool participants or persons authorized by them. The executive body - the Executive Committee, also acts on the basis of a special provision and consists of authorized representatives of the pool participants.
- The formation of the Sochi insurance pool was carried out in order to protect the construction sites of the Olympics in 2014. It ceased to exist in 2010, since the participants in the pool: SOGAZ, AlfaStrakhovanie, Hephaestus, Ingosstrakh, RESO-Garantia, Rosgosstrakh and Soglasie violated the provisions of antitrust laws to establish or maintain identical prices for insurance services, the division of the market and the creation of obstacles to access to the market of other insurers. The purpose of creating an insurance pool is now clear.
Terms of Creation
A pool can be created for a period of time or without time limits. It operates on the basis of an agreement signed by all insurers participating in the pool. Their number is not limited by law and can be any number. Members of the insurance pool enter into insurance contracts in accordance with the unified working conditions and insurance tariffs within the limits established in the agreement on the maximum amount of obligations for all risks separately. The redistribution of insurance premiums received according to the concluded agreements between the pool members is carried out in accordance with their share in the risks accepted for insurance. The activities of members of the insurance pool should be aimed at creating suitable insurance conditions for customers. Insurers are responsible for the fulfillment of all designated obligations under the agreement on participation in the insurance pool. In addition to the above pools, in our country the following pools are formed:
- environmental;
- intended for insurance of municipal housing;
- whose participants insure construction and installation calculations;
- for health insurance.
Work principles
The pool can work based on two principles: joint insurance and reinsurance. In the first option, it is assumed that the insurers conclude an agreement with one insurer, to whom the policy is handed. It contains information on the amount of payments from each insurance company. The latter, in turn, receive contributions according to their degree of participation in the risks. The client can demand insurance payments from the company that issued him the policy, and from each insurer - a participant in the pool.
Reinsurance is considered the most common option in the West. Here the insurer himself enters into an agreement with the client. Partially, payments that exceed the insurer's own financial capabilities are transferred for reinsurance to the insurance pool, where they are subject to reallocation between its members. Along with partial risks, insurance premiums are also subject to transfer. In the event of a risk event, insurance will be paid to all pool members who have received contributions. Insurers who are members of the community are subject to legal liability. In order to become a participant, the presence of certain securities is required: license, constituent documents, balance sheet.
We examined the definition of the insurance pool and the specifics of formation.
Finally
The Russian insurance market confirms the demand for insurance of large risks in the environmental and agricultural sectors, in industrial enterprises with significant wear and tear on equipment. The formation of such associations as the Russian nuclear insurance pool and others is a modern necessity with increasing risks of various types of disasters.