What damages does the Insurance Consortium pay for floods, earthquakes, and other extraordinary phenomena

To amend the Regulation of the extraordinary risks insurance, it is necessary to clearly distinguish between two levels: that of the regulatory norm itself (the Regulation approved by Royal Decree 300/2004) and that of its legal coverage (mainly the Legal Statute of the Insurance Compensation Consortium, approved by Royal Legislative Decree 7/2004). Only at this second level do the General Courts intervene with a full parliamentary procedure.

1. Basic regulatory framework of the extraordinary risks insurance

• Legal coverage norm: the consolidated text of the Legal Statute of the Insurance Compensation Consortium, approved by Royal Legislative Decree 7/2004, of October 29, regulates, among other functions of the Consortium, the system of coverage of extraordinary risks and the surcharges that finance it.
• Specific Regulation: the Regulation of the extraordinary risks insurance is approved by Royal Decree 300/2004, of February 20, which develops that legal framework and specifies concepts, coverages, definitions of extraordinary phenomena, deductibles, etc.

This regulation has subsequently been amended by other royal decrees (for example, Royal Decree 1265/2006 or Royal Decree 1386/2011), which allows us to see in practice what the usual reform channel is.

2. What happens if only the Regulation is to be amended?

The Regulation of the extraordinary risks insurance has regulatory rank (Royal Decree, Government norm). Therefore, its amendment is a decision of the Executive Power, not a law processed by the Courts. Consequently:

• There are no strict parliamentary steps to amend the Regulation: no bill, no debate and vote in Congress and Senate, no royal sanction in the form of law.
• The channel is the approval of a new amending Royal Decree by the Government, following the internal procedure for drafting regulatory provisions:
  • Initiative of the competent ministry (currently the Ministry of Economy/Financial Sector).
  • Technical and legal reports (Directorate General of Insurance and Pension Funds, Insurance and Pension Funds Advisory Board, other bodies as deemed appropriate).
  • If applicable, hearing and public information procedures, if considered appropriate or required by procedural regulations.
  • Opinion of the Council of State when appropriate.
  • Deliberation and approval by the Council of Ministers.
  • Signature by the King and publication in the Official State Gazette.

The General Courts could only intervene indirectly, through political control (questions, interpellations, non-legislative motions, motions) regarding the opportunity or content of the reform, but do not vote on the regulation nor formally participate in its approval or amendment.

3. When are there parliamentary steps? Reform of the legal coverage

If the intention is to alter elements currently fixed by law (for example, essential aspects of the Consortium's regime, the legal configuration of the extraordinary risks insurance itself, the surcharge system as defined by law, etc.), a regulatory change would no longer suffice. In that case, a legislative reform of the Legal Statute of the Consortium or other insurance laws would be necessary.

In that scenario, the parliamentary steps would be those of an ordinary law reform:

• Presentation of the initiative:
  • As a bill, at the initiative of the Government, or
  • As a private member's bill, at the initiative of parliamentary groups, Senate, regional assemblies or popular legislative initiative, if requirements are met.
• Processing in the Congress of Deputies:
  • Consideration (if it is a private member's bill).
  • Amendment phase to the articles.
  • Debate in committee (and, if applicable, subcommittee) and approval of a report.
  • Final debate and vote in the Plenary of the Congress.
• Referral to the Senate:
  • Possibility of amendments and veto.
  • Vote in the Plenary of the Senate.
  • Return to the Congress, which may accept the amendments or override the veto, if any.
• Sanction and promulgation by the King and publication in the Official State Gazette.

4. Summary

Therefore, if the question is limited to “amending the Regulation of the extraordinary risks insurance,” the answer is that no parliamentary steps are necessary: the change is made by Royal Decree of the Government. Only if it is decided to go further and reform the legal coverage norm (Legal Statute of the Consortium or other insurance laws), do the ordinary legislative procedures of Congress and Senate come into play.

The Insurance Compensation Consortium (CCS) is a state public business entity whose powers are mainly defined by Royal Legislative Decree 7/2004, of October 29, which approves the consolidated text of its Legal Statute (BOE-A-2004-18910), complemented by Law 20/2015, of July 14, on the regulation, supervision, and solvency of insurance and reinsurance entities (BOE-A-2015-7897), Royal Decree 300/2004, of February 20, Regulation of the extraordinary risks insurance (BOE-A-2004-3373), and Law 21/2007, of July 11, which amends the consolidated text of the Law on civil liability and insurance in motor vehicle circulation (BOE-A-2007-13410).

1. Coverage of extraordinary risks

The historical core of the CCS's activity is the coverage of so-called extraordinary risks on persons and property. The Legal Statute (RDL 7/2004) establishes the CCS as the entity responsible for compensating losses resulting from extraordinary events, and the Regulation of the extraordinary risks insurance, approved by Royal Decree 300/2004, develops the coverage system and defines such risks (extraordinary flooding, atypical cyclonic storm, earthquake, volcanic eruption, terrorism, etc.).

According to the articles of the Statute regulating this matter (chapter on “compensation of losses due to extraordinary events”), the CCS:

• Must indemnify insured parties who have paid the mandatory surcharge in its favor when claims occur due to extraordinary events.
• Is liable when the extraordinary risk is not covered by an ordinary policy or when, even if a policy exists, the insurance entity cannot meet its obligations due to bankruptcy or liquidation (articles of the Statute on obligation to indemnify and covered situations).
• Determines, jointly with the Directorate General of Insurance and Pension Funds (DGSFP), the policies and branches subject to surcharge and exclusions, under the terms of the Statute and RD 300/2004.

2. National guarantee fund in motor vehicle insurance

In the field of mandatory civil liability insurance in motor vehicle circulation, traffic and motor insurance regulations assign the CCS a role as national guarantee fund. Law 20/2015 expressly defines that “in Spain the national guarantee fund is the Insurance Compensation Consortium” (passages of the preliminary title, where the notion of guarantee fund is introduced).

After the reform made by Law 21/2007 on the consolidated text of the Law on civil liability and insurance in motor vehicle circulation, article 11 of that law (according to the wording inserted by Law 21/2007 itself) establishes that the CCS is responsible for:

• Indemnifying personal injuries when the causing vehicle is unknown, and also certain material damages if “significant personal injuries” concur.
• Indemnifying damages to persons and property when the vehicle habitually parked in Spain is not insured.
• Indemnifying when the vehicle is insured but has been stolen or there is theft of use.
• Indemnifying when a dispute arises between the CCS and an insurer about who must pay, later reimbursing the insurer to the CCS if it is determined that the insurer was the one who had to indemnify.
• Indemnifying when the Spanish insurer has been declared in bankruptcy or is in liquidation intervened or assumed by the CCS itself.
• Reimbursing compensation bodies of other States of the European Economic Area in cases provided by community regulations (article 11, sections f) and following).
• Performing functions as an information body on motor insurance, assuming the tasks assigned by articles 24 and 25 of the mandatory insurance law.

3. Functions of liquidation of insurance entities

Law 20/2015, in its regulation of the liquidation of insurance entities, foresees that the competent Ministry may entrust the CCS with the administrative liquidation of insurance companies (for example, in the provisions of the title regulating the powers of the DGSFP and liquidations through the Consortium). The preamble of Law 20/2015 highlights that:

• The CCS can assume the liquidation of insurance entities with the aim of protecting creditors under insurance contracts.
• Its action in insolvency proceedings is regulated to coordinate it with the Bankruptcy Law and strengthen the position of the insured.
• It is allowed to anticipate certain credits (for example, labor claims) charged to its resources within such liquidations.

4. Management of surcharges, registries, and information

The Legal Statute (RDL 7/2004) dedicates several articles to the management of mandatory surcharges in favor of the CCS: it defines the branches subject to surcharge (life, accidents, property damage, civil liability of vehicles, etc.), the tax nature of the surcharge to finance loss compensation and liquidation functions of entities, as well as the obligations of insurers in collecting and paying such surcharges and the inspection exercised through the DGSFP.

Additionally, Law 20/2015 entrusts the CCS with new informational functions, including:

• The management of the registry of mandatory insurances, centralizing information on certain insurances that the law itself classifies as mandatory.
• The collection and provision of information related to the fire branch to improve the liquidation and collection of fees and special contributions linked to public fire extinguishing services (preamble and articles of Law 20/2015 on statistical and informational functions of the CCS).

5. Nature and other functions

The Legal Statute (chapter of general provisions) qualifies the CCS as a public business entity attached to the competent Ministry in economy/insurance matters, with general interest purposes linked to the stabilization of the insurance system. Among its complementary functions are the management of specific technical provisions (developed, for example, in Royal Decree 2013/1997, on CCS provisions) and the possibility of entering into agreements with other insurance institutions and public bodies for better fulfillment of its purposes.

In summary, according to current legislation, the Insurance Compensation Consortium concentrates powers in three main areas: coverage of extraordinary risks, acting as a national guarantee fund in certain mandatory insurances — especially motor insurance —, and liquidation and intervention in insolvency situations of insurers, in addition to broad functions of surcharge collection and information to serve supervision and the proper functioning of the insurance market.

For a private policy to be included in the Spanish coverage system of extraordinary risks managed by the Insurance Compensation Consortium (CCS), it is not enough for the entity to declare “Consortium coverage”: a series of legal and formal requirements must be met, mainly established in the Regulation of the extraordinary risks insurance (Royal Decree 300/2004, of February 20) and in the Legal Statute of the Consortium (Royal Legislative Decree 7/2004, of October 29), developed by subsequent resolutions and orders.

1. Territorial scope and risk location

Article 1 of the Regulation (Royal Decree 300/2004) requires that the risk be located in Spain for the ordinary coverage of the CCS to operate. For these purposes, risks located in Spain include, among others:

• Vehicles with Spanish license plates.
• Real estate located in national territory and movable property located in such real estate (except goods in commercial transit).
• In personal insurance, when the insured has their habitual residence in Spain.
• In other cases, when the policyholder has residence or registered office/branch in Spain.

Additionally, the Regulation itself provides that the CCS also indemnifies personal damages from extraordinary events occurring abroad when the insured habitually resides in Spain.

2. Types of policies and branches included and excluded

Article 4 of the Regulation determines in which policies the surcharge is mandatory and, therefore, in which policies the insured are covered by the extraordinary risks system:

• Damage insurance: terrestrial and railway vehicles, fires and natural events, other property damage (theft, glass, machinery, electronic equipment, etc.), civil liability in terrestrial motor vehicles and various pecuniary losses linked to uninhabitability, eviction or loss of rental income of dwellings.
• Personal insurance: life branch policies that exclusively or mainly guarantee the risk of death (including those that add disability), and accident policies that cover death or disability/incapacity for work, even when contracted as a complement to other insurances or to implement pension commitments.

Excluded are, among others:

• Combined agricultural insurances and other policies on agricultural productions insurable by this system.
• Insurance of goods transport and construction and assembly (including policies subscribed in compliance with the LOE).
• Policies not included in the list of article 4 (art. 6.b of the Regulation).

3. Correspondence of goods, persons, and insured sums

The Regulation establishes that the coverage of extraordinary risks will cover the same goods or persons and the same insured sums set for ordinary risks in the policy (art. 5.1), with nuances:

• Modalities such as first risk, partial value, agreed value, new value, floating capital, automatic revaluation or margin clause are admitted, always under the same terms as in the ordinary insurance.
• If there is underinsurance (insured sum lower than real value), the CCS will indemnify proportionally (proportional rule of art. 5.3).
• In life insurance with mathematical provision, the CCS covers only the capital at risk (insured sum minus provision), the provision being the responsibility of the insurance entity.
• For vehicles with only mandatory civil liability policy, the CCS guarantees the market value of the vehicle before the claim.

4. Coverage clause and surcharge to the Consortium

For the policy to be included in the system it is essential:

• That the policy includes the Consortium coverage clause, drafted exactly in the terms approved by the Directorate General of Insurance and Pension Funds (art. 12 of the Regulation and Resolution of March 28, 2018, amended by Resolution of December 30, 2025, BOE-A-2018-5115 and BOE-A-2025-27118).
• That the insured pays the mandatory extraordinary risks surcharge on the insured capitals, according to the surcharge rates and technical criteria of the aforementioned Resolution.
• That the insurable entity declares and pays those surcharges to the CCS and sends the complementary information of policies and capitals through the Surcharge Information System.

Other clauses or agreements different from the standard clause published in the Official State Gazette are not valid; their alteration may jeopardize the correct inclusion in the system.

5. Deadlines, waiting period, and deductibles

Additionally, temporal and deductible conditions are required:

• Waiting period (art. 8): in material damage by natural phenomena, the policy must be issued (or in effect) at least seven days before the claim, except for certain exceptions (replacements without interruption, automatic revaluations, prior impossibility to insure due to lack of interest).
• Deductible (art. 9 of the Regulation and Order ECC/2845/2015, BOE-A-2015-14332): in property damage insurance, the insured generally bears a deductible of 7% of the indemnifiable damage, with no deductible in dwellings, homeowners' associations, and vehicles insured by automobile policies. No deductible applies in personal insurance.

In summary, a policy is considered included in the extraordinary risks system when: it belongs to a branch with mandatory surcharge, covers a risk located in Spain under the terms of the Regulation, reproduces the official Consortium clause, applies and declares the approved surcharge, and respects the requirements on insured sums, waiting period, and deductibles provided in the cited regulations.