Earthquake in Granada: how to claim compensation for damages to homes, cars, and businesses

The Regulation of extraordinary risk insurance is a regulatory rule approved by Royal Decree of the Government (currently, Royal Decree 300/2004 and its subsequent amendments, such as Royal Decrees 1265/2006 and 1386/2011). This means that it is not amended through an ordinary legislative procedure in the Cortes, but through the Government's regulatory authority. Parliament intervenes mainly in an indirect way, through the law that enables and frames that regulation and through political control.

1. Where the Regulation is placed in the normative hierarchy

The extraordinary risk system rests on three levels:

• Laws (and legislative royal decrees) that set the statute of the Insurance Compensation Consortium and the main principles of extraordinary risk insurance (for example, the Legal Statute of the Consortium approved by Royal Legislative Decree 7/2004 and the successive legal reforms of the insurance sector, such as Law 20/2015).
• Regulation of extraordinary risk insurance, approved by Royal Decree 300/2004, which technically develops the coverage, the extraordinary phenomena included, the operation of policies, deductibles, etc., and has been amended by other royal decrees.
• Development rules of lower rank (ministerial orders and resolutions of the Directorate General of Insurance and the Consortium itself) that specify rates, surcharges, declaration models, policy clauses, etc.

Therefore, the Cortes Generales only act directly on the “law” level; the Regulation is amended, in principle, by Government decision within the framework established by those laws.

2. What happens if only the Regulation is to be changed

If the desired amendment fits within the current law (for example, adjusting technical definitions, deductibles, or operational aspects), the channel is a new Royal Decree amending the Regulation:

• Initiative from the Ministry of Economy/competent State Secretariat, in coordination with the Directorate General of Insurance and the Consortium.
• Drafting of the Royal Decree project that modifies the Regulation of extraordinary risk insurance.
• Preparation of the Regulatory Impact Analysis Report and obtaining reports (Technical General Secretariat, State Attorney, other ministries, relevant advisory bodies).
• Prior public consultation and public hearing and information through the Government consultation portal, where citizens, insurers, and organizations can submit allegations (according to the scheme explained in the pieces “I want to influence” and in the guide on public consultation and hearing).
• If applicable, opinion of the Council of State or corresponding advisory body.
• Approval by the Council of Ministers of the amending Royal Decree and publication in the BOE, with the effective date set by the rule itself.

In this process, there is no parliamentary vote or processing of the Regulation. The control by the Cortes is political (questions, interpellations, motions, non-legislative proposals) or, eventually, through initiatives to reform the law underpinning the system.

3. When there is a full parliamentary procedure

There are changes that cannot be made only via regulation, because they require the rank of law. According to recent legislative practice in insurance and what the notes from the Congress and Senate on reforms of Law 20/2015 and the insurance regime show, a law processed by the Cortes is needed when intending to:

• Significantly reconfigure the Legal Statute of the Consortium (functions, nature, basic financial regime).
• Modify surcharges, obligations, or tax elements linked to the system, which require a legal reserve.
• Affect the general supervision and solvency regime of insurance entities (such as reforms to adapt Solvency II).
• Impact matters of fundamental rights or special constitutional protection.

In these cases, the Government presents a bill or a group files a private member's bill. The text is processed in the Congress (working group, committee, plenaries, amendments), passes to the Senate and returns, if applicable, to the Congress, following the scheme described in the official notes on insurance law reforms. The approved law then requires adapting the Regulation, which will be amended by a new Royal Decree to adjust it to the new legal framework.

4. Summary of the parliamentary role

In summary:

• The direct amendment of the Regulation of extraordinary risk insurance is a regulatory act of the Government, not a parliamentary procedure.
• The Cortes influence indirectly by setting the framework through laws, approving legal reforms that require tweaking the Regulation, and exercising intense political control over the Government (debates, resolutions, driving initiatives).
• If the goal is to change core aspects of the system that require the rank of law, then a full parliamentary process on the base law is activated; once approved, the Executive adjusts the Regulation by Royal Decree.

The Insurance Compensation Consortium (CCS) is a public business entity attached to the State whose basic regulation is contained in Royal Legislative Decree 7/2004, of October 29, approving the consolidated text of the Legal Statute of the Insurance Compensation Consortium (BOE-A-2004-18910), amended, among others, by Law 12/2006 and Law 6/2009. Likewise, Law 20/2015, on the organization, supervision, and solvency of insurance and reinsurance entities (BOE-A-2015-7897) completes its framework in matters such as entity liquidation and surcharges.

According to the Legal Statute, the CCS is configured (art. 1) as a public business entity with its own legal personality, assets separate from the State, and generally subject to private law, and its purpose is “to cover the risks in the insurances determined in this legal statute”, in addition to exercising certain specific public functions.

1. Coverage of extraordinary risks

One of its most characteristic powers is the coverage of so-called extraordinary risks. The Statute establishes that the CCS indemnifies, under a compensation regime, losses derived from extraordinary events occurring in Spain that affect risks located in national territory, as well as certain personal damages caused by extraordinary events occurring abroad when the policyholder has habitual residence in Spain.

For these purposes, losses are considered both direct damages to persons and property and, under the terms and limits set by regulation, pecuniary losses (for example, loss of profits) resulting from such events. The specific regime of surcharges, coverage clauses, and deductibles is currently completed with development regulations such as the Resolution of March 28, 2018, of the Directorate General of Insurance and Pension Funds, on surcharges in favor of the Consortium in extraordinary risks (BOE-A-2018-5115) and Order ECC/2845/2015 on deductibles in extraordinary risks (BOE-A-2015-14332).

2. Mandatory automobile insurance and guarantee fund

Regarding civil liability insurance in motor vehicle circulation, the Legal Statute and Royal Legislative Decree 8/2004, on civil liability and insurance in motor vehicle circulation assign the CCS functions such as:

• Acting as insurer of last resort for contracting civil liability coverage of certain public administrations and risks not accepted by the insurance market, within the limits of mandatory insurance.
• Exercising functions as a guarantee fund in specific cases (unknown vehicle, uninsured, stolen, insolvent entity, etc.), financed by a specific surcharge on mandatory insurance premiums, regulated in the Resolution of May 31, 2016 on the surcharge to finance this function (BOE-A-2016-5431).

3. Reinsurance and functions in other branches (agricultural, nuclear, forest fires)

The Statute empowers the CCS to accept co-insurance and reinsurance agreements and, in particular:

• Participate, as reinsurer or complementary insurer, in combined agricultural insurance, when the market does not reach the capacity provided in Law 87/1978 on Combined Agricultural Insurance, or under the terms set by the competent Ministry. This function is articulated each year through orders and resolutions on the reinsurance system charged to the CCS (for example, Order ECE/497/2019 for the XL Combined Agricultural Insurance Plan: BOE-A-2019-6539).
• Assume, under the terms established in the legislation on civil liability for nuclear damage, part of the coverage of nuclear risks when a certain liability limit is not reached, as well as act as reinsurer in this area.
• Cover the risk of forest fires under the terms provided in its specific legislation, both as direct insurer in certain modalities and through compensation mechanisms.

4. Liquidation of insurance entities

Following the assumption of the functions of the former Insurance Entities Liquidation Commission, the CCS is today, according to the Legal Statute and Law 20/2015, the public liquidator of insurance entities in specific cases. The corresponding article (amended by Law 20/2015) provides that the Consortium will assume the condition of liquidator when so entrusted by the Ministry of Economy or the competent regional body, in situations such as:

• Administrative dissolution of the insurance entity.
• Absence of appointment of liquidators or irregularity of such appointment.
• Non-compliance with insured protection rules, unjustified delay, or circumstances advising entrusting the liquidation to the Consortium.
• Justified request by the entity itself.

In these cases, the CCS exercises liquidation functions within the framework of insolvency legislation and insurance regulation and supervision (currently, the consolidated text of the Insolvency Law and Law 20/2015).

5. Management of surcharges and other public functions

The Legal Statute defines as public functions of the CCS, among others (arts. 3 and 16):

• The levy and management of mandatory surcharges in its favor in various insurance modalities (extraordinary risks, automobile guarantee fund, surcharge for entity liquidation, etc.), as well as the refund of undue income and control of compliance by insurance entities.
• The functions attributed by the export credit insurance legislation on behalf of the State, in coordination with the Spanish Export Credit Insurance Company.
• Collaboration with the Directorate General of Insurance and Pension Funds in inspection tasks of those who collect surcharges and premiums on behalf of the Consortium.

Overall, current legislation configures the CCS as a key piece of the Spanish insurance system: it acts as a stabilization mechanism against extraordinary or hard-to-insure risks, as a guarantee fund for the protection of victims in mandatory automobile insurance, and as a public instrument for orderly resolution of insurance entities in crisis situations, all essentially financed through mandatory surcharges on premiums and managed under a specific legal statute.

In Spain, coverage against extraordinary risks such as earthquakes is mainly structured through the Insurance Compensation Consortium, and not as a pure market risk. Insurance entities offering damage or personal insurance affected by this system must comply with a series of specific legal requirements, in addition to those derived from the general regime of organization and solvency.

The core regulation is in the Regulation of extraordinary risk insurance, approved by Royal Decree 300/2004, of February 20, which regulates coverage by the Consortium of losses derived from extraordinary phenomena. Among these phenomena, it explicitly includes earthquakes and tsunamis, along with extraordinary floods, volcanic eruptions, atypical cyclonic storms, and other events. This regulation is complemented by the Legal Statute of the Insurance Compensation Consortium (consolidated text approved by Royal Legislative Decree 7/2004) and various regulatory norms and resolutions that set rates and surcharges.

In parallel, the general requirements for access and exercise of insurance activity, solvency, corporate governance, and risk management are collected in Law 20/2015, on the organization, supervision, and solvency of insurance and reinsurance entities and its main regulatory development, Royal Decree 1060/2015, of November 20. These rules (Solvency II) require insurers to have adequate capital, risk management systems, and technical provisions appropriate to the risk profile, including catastrophic risks.

1. Mandatory coverage and surcharge in favor of the Consortium

The Spanish system establishes that, in certain branches (for example, property damage insurance, personal insurance, and certain motor vehicle civil liability coverages), when a private policy is contracted, the extraordinary risk (including earthquake) is mandatorily covered by the Consortium, provided there is an ordinary insurance in force and up to date with payments.

Insurance entities are obliged to:

• Collect a mandatory surcharge in favor of the Consortium on the premiums of insurances included in the extraordinary risk regime, applying the rates approved by the Directorate General of Insurance and Pension Funds. These rates and contractual clauses are regulated, among others, in the Resolution of March 28, 2018, modified by the Resolution of December 30, 2025, which sets the surcharges, coverage clause, and information that entities must provide.
• Not alter or reduce the surcharge corresponding to the Consortium, except for the authorized management commission (currently 5 % of the resulting surcharge).
• Declare and periodically remit the collected surcharges, respecting the deadlines and procedures set by the resolutions of the Consortium and the Directorate General of Insurance, and send a complementary information file with details of policies, capitals, risk locations, and other required data.

2. Mandatory clause and information to the policyholder

Another key obligation is to include in policies a standard coverage clause by the Consortium. The 2018 resolution (and its 2025 modification) approves the clause models to be inserted, differentiating between:

• Policies for property damage and mandatory motor vehicle civil liability.
• Policies for personal insurance (life, accidents, etc.).
• Combined policies with coverage for property and persons.

These clauses must explain to the policyholder:

• What is understood by extraordinary risks (explicitly including earthquakes).
• What damages are covered (direct damages to persons and property and, if applicable, loss of profits).
• The deductibles, waiting periods, and exclusions.
• The claim procedure to the Consortium in case of an extraordinary event.

In application of the Insurance Contract Law and sectoral regulations, the insurer must provide clear pre-contractual information and highlight limiting clauses of rights, so that the policyholder knows that, in the event of an earthquake, the final payer will normally be the Consortium, although the surcharge is included in their premium.

3. Solvency requirements and catastrophic risk management

Although the Consortium assumes payment of extraordinary claims under a compensation regime, insurers remain subject to the solvency and risk management requirements of Law 20/2015 and Royal Decree 1060/2015. Among other obligations:

• Maintain sufficient eligible own funds to cover the required solvency capital, which incorporates catastrophe risk.
• Have corporate governance and internal control systems that adequately identify and assess exposure to extreme events.
• Prudently manage any additional or complementary coverage that the entity itself offers beyond the Consortium's protection (for example, limit extensions, coverages not included in the extraordinary risk regime), including, if applicable, appropriate reinsurance programs.

In summary, to offer insurance that covers, directly or indirectly, earthquakes and other extraordinary risks, insurers must be duly authorized and solvent, adhere to the mandatory surcharge and coverage system of the Consortium, strictly comply with collection, declaration, and information obligations, and include in their policies the clauses and explanations required by state regulations.