Frequently asked questions about Spanish Restructuring and Bankruptcy
Are there particular legal provisions in the Spanish jurisdiction concerning the effects of an insured’s bankruptcy or insolvency on the insurance company?
No, there aren’t any legal provisions.
On account of an insured’s bankruptcy or insolvency, what actions or rights could the company exercise?
In the event that the insured doesn’t pay the first premium, this may cause the insurer to demand payment or terminate the contract. Suppose they don’t pay up the accompanying premiums. In that case, the coverage is suspended following a month and will have the contract’s effects suspended if the insurer proves the non-payment.
How might an insured‘s bankruptcy or insolvency situation affect the re-insurers and their cedent insurance company’s relationship?
There is no immediate connection or relationship between the insured and reinsurers.
The insurer is exclusively dependable to the insured. The reinsurance contract must be in agreement with both parties.
What might be the circumstance if an insurance company becomes bankrupt? How would the situation affect insureds and reinsurers?
According to the “Consorcio de Compensación de Seguros” (CCS), which accepts liquidation of the insurer and opens a process of “acquisition of credits from creditors by the insurance contract.” With assets from the CCS, the credit is allotted to the insolvent insurer. Reinsurers: the insured has a unique need over the credit balance regarding the insurer’s account with the reinsured liquidation.
What might occur in the previously mentioned situation with forthcoming reinsurance premiums? Do the reinsurers have any action to collect them?
They would agree as another ordinary creditor in the liquidation process. The reinsurers would have to enter the liquidation process with their credit with the ordinary rating related to it, with no unique priority.
What are the chances of an insurance company becoming bankrupt or insolvent in Spain?
The chances of a company going bankrupt or facing insolvency in Spain are low.
Are there any Spanish regulatory measures adopted to preventing such development?
Yes, this is under the Spanish government guidelines and supervision of Insurance Companies.