FERMA Press Release "FERMA discourages EU from compulsory schemes for catastrophe insurance"

1. Press release
18 July 2013
FERMA discourages EU from compulsory schemes for
catastrophe insurance
The Federation of European Risk Management
Associations (FERMA) has told the European Commission
that any new insurance solutions for catastrophe risks
should be market based and respect freedom of choice
for company insurance buyers.
FERMA has made this comment in its response to the
European Commission green paper on natural and man-
made disasters.
In its response, FERMA stresses the importance of suitable
risk pricing as a mechanism to promote a culture of risk
management. It says that where the private market is
mature and working well, a compulsory scheme is not
desirable. It would create moral hazard – meaning it
would not encourage mitigation measures because rates
would bedivorced from exposure.
In any case, FERMA argues, insurers and risk managers
must have equal access to natural catastrophe data
collected and processed by entities at EU level ahead of
any move towards a mandatory financial security scheme.
FERMA Vice-President Michel Dennery comments,
“Generally speaking, as insurance buying and risk

2. management professionals, our members do not see any
reason for a mandatory framework to improve insurance
market capacities. Although some international
companies would like to find higher coverage than is
currently available, the options assessed in this green
paper do not seem to bring enough disruption to
improve the capacity of the market.
“The biggest and medium sized companies are already
aware of their exposures in case of a major event. Their
risk managers have, for a long time, pushed their
management to mitigate this risk first by increasing
technical defenses, improving processes and training the
management how to handle crises, and thenby buying
insurance to finance the damages, business interruption
and third party liabilities.”
Some other highlights of the response:
Long-term disaster contracts are an interesting option
which would require further analysis and feedback on the
existing solutions. Five years is probably the maximum
period practical to match the changing needs of business.
A parametric solution for EU-wide catastrophe risk is
potentially very expensive and uncertain because of the
level of data that would need to be collected and
analysed.
Public risk management is also necessary and the
Member States have the responsibility to develop public
policies to reduce the impact of disasters through the
adaptation of current and planned public infrastructure.
For more information, contact
Lee Coppack
FERMA media coordinator
or +44 (0)20 8318
0330/+44 (0)7843 089904
Or Florence Bindelle
FERMA executive manager
florence.bindelle@ferma.eu
or +32 (2) 761 94 31

3. About FERMA
The Federation of European Risk Management Associations (FERMA) brings
together 22 national risk management associations in 20 European countries.
FERMA has 4,500 individual members representing a wide range of business
sectors from major industrial and commercial companies to financial
institutions and local government bodies. These members play a crucial role
for their organisations with respect to the management and treatment of
complex risks and insurance issues.
Member associations are from the following countries: Belgium (BELRIM),
Czech Republic (ASPAR CZ), Denmark (DARIM), Finland (FinnRiMa), France
(AMRAE), Germany (DVS/BfV), Italy (ANRA), Luxembourg (ALRiM), Malta
(MARM), Netherlands (NARIM), Norway (NORIMA), Poland (POLRISK),
Portugal (APOGERIS), Russia (RusRisk), Slovenia (Sl.RISK), Spain (AGERS and
IGREA), Sweden (SWERMA), Switzerland (SIRM), Turkey (ERMA) and United
Kingdom (Airmic).