The Norwegian Natural Perils Pool

The Norwegian Natural Perils Pool was formed on January 1st, 1980. Its activities are governed by the Natural Perils Insurance Act and the Rules for the Norwegian Natural Perils Pool. Natural perils insurance is a compulsory cover linked to fire insurance in Norway. All insurers providing fire cover in Norway must be members of the Pool.

Mechanism

The Pool is an equalisation mechanism whereby claims and costs are distributed between members in proportion to their share of the Pool, which corresponds to their share of the market for fire insurance in Norway.

Membership

Companies intending to write fire insurance in Norway must immediately contact the Pool to arrange membership in the NNPP.

Procedures

Natural perils premiums

• are based on the total sum insured against fire
• are collected and retained by the individual insurer to cover claims and costs
• are specified in customers’ insurance contracts

If the premiums earned exceed the insurer’s relative share of claims payments made via the Pool and provisions for outstanding claims, the difference is allocated to a special natural perils reserve at the insurer.

This provision belongs to the insurer and is to be used exclusively to cover future natural perils claims.

The premium rate is set by the Pool’s board. The premium rate and excess are the same for all insurance segments nationwide.

Natural perils claims

• are settled by the individual insurer
• are reported to the Pool as soon as possible using the NINA claims reporting system

Terms

Terms for settlement through the Pool:
      
Settlement is governed by the provisions of the

• Insurance Contracts Act of 16 June 1989
• Natural Perils Insurance Act of 16 June 1989

Insurers settle with their own customers based on their own terms. New terms for settlement through the Pool came in from 1 January 2016. These terms are the maximum that insurers may settle through the Pool and are limited to the insurer’s own terms for fire insurance for the damaged object. The Natural Perils Insurance Act will apply nonetheless where it specifies a different extent of cover or calculation of indemnity.

Distribution formula

The distribution formula reflects members’ share of the Pool and is calculated on the basis of the total sum insured against fire as at 1 July each year.  

Companies starting/ceasing to write fire insurance are to report the sum insured against fire on a quarterly basis during their first/last year of membership.
       
Their share of the Pool in those years is the average sum insured against fire on the final day of each quarter.

Until the new distribution formula is available, the previous year’s formula is applied temporarily. Insurers’ shares for the full year are adjusted once the new formula is available.

Pool costs

• are calculated in January and July
• cover the Pool’s administration and reinsurance costs
• are distributed between members in proportion to their share of the Pool

Monthly statement

All claims reported are pooled and distributed between members in proportion to their share of the Pool.

Members are e-mailed a monthly statement.

Quarterly statement

Each quarter, members receive a quarterly statement with an invoice or credit note. The invoice amount is to be paid to account number 1506.08.56114 (IBAN: NO4615060856114) within two weeks. The Pool’s payments to companies with a credit balance will be made within four weeks.

Annual statement

An annual statement is issued at the end of each year based on the distribution formula as at 1 July that year.

The annual statement covers both claims and costs (administration and reinsurance costs). (The annual statement also adjusts the previous statements for the year in question in line with the new distribution formula.)

Other compensation schemes for damage caused by natural perils in Norway

The Norwegian National Scheme for Natural Damage Assistance (previously the Norwegian National Fund for Natural Damage Assistance) was amended from 1 January 2017.

The role of the scheme is to:

1. provide compensation for damage caused by natural perils, in cases where there is no insurance cover available
2. promote preventive measures to combat such damage 
3. provide financial support for preventive measures  

The scheme does not pay out if a loss is covered by insurance.

Losses are to be reported to the scheme through its website (website in Norwegian only) www.landbruksdirektoratet.no/naturskadeordningen within three months of the loss occurring.

Appeals

The Appeals Board for Natural Damage Cases is a joint appeals body for both compensation schemes.

p.ex.: If a policyholder has a claim reduced or rejected by an insurer, the policy holder may appeal against the decision to The Appeals Board.

• NNPP Programme Summary