Stabilisation Provision

Apart from the Technical Provisions and the Solvency Margin, the Law foresees that the Consorcio should constitute a Stabilisation Provision. This is a common provision when certain types of risk are covered, and is also common in covering catastrophes in many countries. It has an accumulative character ¿ in some cases up to certain limits ¿ and tends to enjoy the benefits of tax exemption.

With regard to our system, it is a provision that has no accumulation limits, that is tax deductible up to a certain limit that is established by law.

As is well known, the setting up of this type of reserve to cover catastrophic risks is absolutely necessary whatever scheme is followed, given their marked cyclical character and also their lack of regularity. In other words, in the case of events that have return periods that are above normal, the insurance industry's own compensation forecasts can only be planned over periods of time that far exceed a year, which necessarily leads to the creation and accumulation of sufficiently high funds.

The State Guarantee

Given the peculiar characteristics of this activity, and especially given the high loss potential and the very nature of the Consorcio as a public organism, it is absolutely necessary for the Consorcio to count on a State guarantee. However, the setting up and appropriate financial management of its resources has always enabled it to face up to its claims obligations without having had to make use of said guarantee in the more than half-century that it has been in existence.