Background

Background information on the pool scheme.

There has been a limited possibility to take out insurance against damage by natural perils such as
landslide, inundation, storm and tempest in Norway since 1918.

The Norwegian National Fund for Natural Damage Assistance (Statens Naturskadefond)
was established with the aim to compensate damage caused by natural perils and to
contribute to protective measures against such perils by the Act on Natural Damage of
June 9th 1961.

Compensation according to the Act was given to damage to real property and
movables caused by natural disaster, such as landslide, storm, flood, storm surge,
storm, earthquake,volcanic eruption or similar natural disaster. There was no
compensation for damage immediately caused by lightning, frost (frozen soil) or drought.
Nor was damage caused by rainfall and ice drift compensated, and there were also
other exceptions and limitations e.g. for damage to standing crops.

There were considerable limitations regarding the amount of compensation. According
to Article 14 there was a deductible NOK 2 000 (now NOK 10 000) and only limited
compensation was paid. The maximum compensations amounted to NOK 405 000.
There was previously also a deductible amounting to 5% of the fortune of the party
who had suffered damage. These rules were changed the 26th January 1999.
The compensation is now limited to 85% of the loss with a maximum deductible of
NOK 60 000.

The Board of the Norwegian National Fund for Natural Damage Assistance has the
possibility to deviate from these rules in special cases.

Insurance involved

Although the Act on Natural Damage represented considerable progress compared to
the previous state, the situation was not considered satisfactory, and in 1971 a
committee was appointed to study the possibility for an amendment of the Act of 1961
and also consider the possibility of covering the damage caused by natural perils
through insurance.

One of the five members of the committee was a representative of the insurance
industry.
The committee found that both with regard to the owner of the damaged property and
also from a social point of view, the best solution would be to compensate damages
caused by natural disasters through insurance.

However, to avoid individual assessment of the risk and in order to provide adequate
cover at reasonable premiums for those who were exposed to such risks, it was
considered necessary to connect insurance against natural perils to an already existing
form of insurance.

According to this it was proposed to make insurance against natural perils a
compulsory part of all fire insurance of objects and property in Norway. It should be
noted that insurance against natural perils has always been included in motor hull
insurance, machinery insurance and other types of all risks insurance.

In compliance with the proposition of the committee, the Act on Natural Damage was
amended June 8th 1979, and at the same time there were also amendments of the
Act on Insurance Contracts. However, a special Act on Natural Perils Insurance of
16th June 1989 was put into force on 1st July 1990.

According to Article 1, in the Act on Natural Perils Insurance of 1989, insurance of
objects against fire shall also comprise natural perils to the extent the damage is not
covered by another insurance (e.g. motor / hull insurance).