2013年-世界发展银行全球_Colombia___Improving_Property_Catastrophe_Insurance_Coverage_of_Public_Infrastructure_under_Concessions_4页_766kb

Summary of Insurance of Public Infrastructure Under Concessions

Core Content

This document outlines the efforts of the Government of Colombia (GoC) to improve the insurance coverage of public infrastructure under concessions, as part of an integrated Disaster Risk Financing and Insurance (DRFI) strategy. The initiative was supported by the World Bank since 2012, aiming to reduce the government's contingent liabilities to natural disasters and enhance financial resilience.

Main Problem

Colombia experiences a high frequency of natural disasters, with over 600 annually, making it the country with the highest rate of recurrent natural disasters in Latin America. The 2010-2011 La Niña season caused significant damage, particularly to transport infrastructure, with losses estimated at US$1.7 billion. A legal dispute arose between the government and concessionaires over liability for the damage, with the government bearing the majority of the responsibility.

Key Objectives

• Reduce the GoC's contingent liabilities to natural disasters.
• Enhance the financial protection of public infrastructure under concessions.
• Align insurance requirements with international (re)insurance market best practices.
• Improve transparency and quality of insurance coverage in public-private partnership (PPP) projects.

Main Solutions

The World Bank provided technical guidelines to the Ministry of Finance and Public Credit (MHCP) to enhance insurance requirements for concessions. These guidelines were integrated into the Master Insurance Contract, which governs all PPP concessions in Colombia. The enhanced insurance requirements include:

Insurance Contract Participants

• Insurance companies: Must be authorized, registered, and have adequate solvency margins. They must demonstrate expertise in the specific risks.
• Local intermediaries: Must be registered and have fidelity and liability insurance. They must show experience in managing the relevant portfolios.
• Reinsurers: Must be registered in REACOEX, have minimum ratings, and submit reinsurance slips with all relevant details (e.g., premium, share, tax, etc.).
• Reinsurance brokers: Must be registered in REACOEX, deliver cover notes, and monitor reinsurer ratings. They must replace reinsurers that fall below the required standards.
• Loss adjustors: Must be appointed at the start of the insurance and reinsurance contracts. They should have experience in specialized insurance products and maintain liability insurance.

Insurance Coverage Requirements

• The policy covers catastrophe risks such as floods and earthquakes, but is not limited to these.
• Minimum standards are set for insurance covers, including:
  • Civil engineering, completed risks
  • Contractors, all-risk
  • Material damage, all-risk
  • Liability (public and products)
  • Surety (bonds)

Underwriting and Transparency

• Minimum information on risks must be provided to insurers to reduce underwriting risk.
• Terms and conditions are aligned with international market practices.
• Addendums to the general and particular conditions are required to ensure clarity and consistency.

Lessons Learned

• The enhanced insurance requirements for concessions can be applied at the sub-national level and to other types of concessions.
• The MHCP plans to extend these requirements to regional and municipal levels and to all types of infrastructure.
• Colombia’s experience has prompted interest from other countries, such as Peru, in seeking technical assistance for similar initiatives.
• Key activities for sustainable and cost-effective insurance of public assets include:
  • Legal and institutional assessment
  • Market analysis
  • Compilation and evaluation of current insurance policies
  • Definition of terms and conditions based on international practice
  • Identification of technical and legal insurance options
  • Implementation and monitoring of insurance programs

Conclusion

The improved insurance requirements for concessions aim to reduce the GoC's financial exposure to natural disasters by transferring risk to the private sector, ensuring only high-quality participants are involved, and minimizing underwriting risks. These reforms are expected to enhance investor confidence and support the government's broader fiscal and disaster risk management strategies.

Key Information

• Annual expected losses: US$490 million (0.7% of the GoC budget)
• One in 100 year losses: US$3.0 billion (4.4% of the GoC budget)
• Fourth generation of concessions: Expected to invest US$22.5 billion in infrastructure from 2013-2014
• World Bank support: Delivered technical guidelines and assistance in developing the DRFI strategy

Glossary