Budapest, Challenges and opportunities for the insurance sector on example of Polish market Piotr Wójcik Liability Department Director

Budapest, about Polish market Poland is between Germany and Ukraine GermanyPolandUkraine GDP 2005 (billions USD) GDP per capita 2005 (USD) liability market total premium*) (USD Millions) premium divided by GDP0,29%0,07%0,11% *) general liability excluding motor liability

Budapest, basic insurance concepts two different types of financial instruments  insurance (always issued by insurer) liability is TRANSFERRED to the insurer aim is to allow claimant to get money AND allow company to continue its activity always LIMITED SCOPE of cover (exclusions, deductible, limit) insurer assesses PROBABILITY OF DAMAGE therefore not available for certain activities  guarantee (issued by bank or insurer) aim is to SECURE payment company always PAYS BACK to guarantor, so company can go bankrupt anyway usually very BROAD SCOPE of cover (few exclusions, no deductible, limit) guarantor assesses FINANCIAL STRENGTH of company therefore available for all activities if company is financially strong

Budapest, basic insurance concepts  activity of insurers is strongly affected by their reinsurers  Polish market closely cooperates with MunichRe, SwissRe, HannoverRe, SCOR  typical reinsurance programme on Polish market: first USD 1 Mio of single damage is paid by direct insurer next USD 39 Mio of single damage is paid by reinsurer if all payments accumulated during calendar year exceed USD 39 Mio – no reinsurance coverage anymore  thus all insurance products must be agreed with reinsurers

Budapest, basic insurance concepts  voluntary insurance insurer can agree with client scope of coverage usually narrower scope of cover than compulsory one insurer can decide if he accepts particular risk therefore insurance market strongly affects safety standards in many areas (pharmacy, chemical industry, construction works, food etc.) law and high limits – on Polish market from € up to €  compulsory insurance there is no possibility to negotiate scope of cover usually broad scope of cover in many countries insurer can not refuse to accept particular risk usually law limits – on Polish market from € up to €  for complicated risks most effective system is mixture of both

Budapest, available environmental damages insurance  Polish market offers insurance coverage for PART OF environmental damage: arising from sudden and accidental event, i.e. gradual emission (for example small, constant leakage) is NOT covered damage caused by emissions within permission is NOT covered liability arising from civil law regulations, i.e. public liability, like Environmental Liability Directive, is NOT covered liability for bodily injury and property damage loss of income can be partially covered costs of decontamination of soil and waters as an prevention against civil claim damages which occurred on Polish and foreign territory excluding USA and Canada

Budapest, available environmental damages insurance  basic exclusions from the coverage: intentional fault, gradual pollution, damages caused by listed substances: asbestos, dioxins, PCB  it is not possible or difficult to get coverage for some activities, like final wastes disposals  coverage is always limited by annual aggregate i.e. total sum of payments within annual period is limited by sum insured  high deductibles are always applicable from € up to €

Budapest, available environmental damages insurance  claims made trigger is usually applicable ! i.e. policy is triggered by claim filed during insurance period if it arises from occurrence which happened after agreed date

Budapest, claims made trigger INSURANCE PERIOD (1 YEAR) OCCURRENCE COVERED CLAIM AGREED DATE

Budapest, claims made trigger INSURANCE PERIOD (1 YEAR) OCCURRENCE COVERED CLAIM AGREED DATE

Budapest, claims made trigger INSURANCE PERIOD (1 YEAR) OCCURRENCE COVERED CLAIM AGREED DATE

Budapest, claims made trigger INSURANCE PERIOD (1 YEAR) OCCURRENCE COVERED CLAIM AGREED DATE

Budapest, as a result...  partial coverage is available now  it will be developed in EU countries because of Environmental Liability Directive insurance requirements  it is necessary to find solution for remaining part of the liability state funds? pools?

Budapest, thank you for your attention