Regulation on instructions for the Norwegian Natural Perils Pool

Effective as of 1st January 2017

Stipulated by Royal Decree of 21 December 1979 with the amendments stipulated by the Ministry of Justice on 3 January 1983 and amendments of 8 December 1988, as well as by Royal Decree of 25 November 1994 and amendments stipulated by the Ministry of Justice on 20 November 1997, amendments of 10 May 2001, amendments of 11 October 2002, amendments of 21 December 2007, amendments of 14 January 2011, amendments of 19 February 2016 and amendments of 16 December 2016 (in force 1 January 2017).

Pursuant to Act no 70 of 16 June 1989. Relating to insurance of damage caused by Natural Perils the following is stipulated:

§ 1 Participants

Participants in the Norwegian Natural Perils Pool (NP) are all the non-life insurance companies covering loss or damage due to natural disasters pursuant to Section 1, cf. Section 4 of the Natural Perils Insurance Act.

§ 2 Purpose

The NP is a liaison between the participants and the Agriculture Directorate. It settles the compensation for loss or damage due to natural disasters between the companies and arranges reinsurance cover for Norwegian natural disaster insurance.

§ 3 Compensation for loss or damage due to natural disasters

Compensation for loss or damage due to natural disasters are the compensation claims regarding property in Norway that arise pursuant to the first paragraph, cf. second paragraph, Section 1 of the Natural Perils Insurance Act. Additional cover of interests stipulated in the conditions in excess of the insurance amount that are beyond the scope of the statutory natural disaster insurance and similar cover of unvalued insurance may not be included in the basis for compensation distributed through the NP.

Compensation for loss or damage due to natural disasters does not include expenses for preventative measures, moving or other measures that are not due to direct damage to the insured building or contents. If insured property is damaged or directly threatened by the occurrence of a natural disaster, necessary salvage expenses as discussed in Section 4-10 of the Insurance Contracts Act up to the insured value are covered. If a declaration is registered for a building after loss or damage due to a natural disaster pursuant to Section 22 of the Natural Disaster Act stating that the properly is especially vulnerable to natural perils and the expenses for improvements are 60 per cent or more of the insured value of the damaged building, then the company is responsible for the increase in damage resulting from a denial of repair/rebuilding.

§ 4 Stipulation of compensation

Each company regulates the natural disaster claims that are reported.

The NP’s Board may in consultation with the Government Natural Disaster Fund stipulate additional procedural rules in connection with the companies’ stipulation of compensation, including assessment rules.

In accordance with the guidelines stipulated by the Board of the NP, the companies determine whether loss or damage due to a natural disaster has occurred pursuant to the first paragraph, Section 1 of the Natural Perils Insurance Act or if the conditions for reducing or denying compensation pursuant to the third paragraph, Section 1 of the Natural Perils Insurance Act have been met. In cases of doubt, the company, claimant or NP’s Board may bring the matter before the Government Natural Disaster Fund’s Board of Appeal, cf. the first paragraph, Section 2 of the Natural Perils Insurance Act.

§ 5 Claim notice

All claims shall be reported to the NP every month, no later than the last day of the month the loss occurred. The reports shall be made on special forms and contain information on the gross size of the damage and payments made.
In the case of coinsurance the claim may be reported by the lead company only. The NP’s Board stipulates its own rules for the reporting form and the use of that form.

Amended by Regulations 10 May 2001 No. 478 (in force 1 July 2001), January 14, 2011 No. 39 (effective February 1, 2011).

§ 6 Claim year

A separate settlement and distribution is made for the damage or losses that have occurred during a single calendar year. Final settlement and distribution is made when all the claims for a calendar year have been settled. The damage and losses of a calendar year and subsequent corrections represent a claim year.

§ 7 Claims equalisation

The basis for claims equalisation is the participants’ compensation for loss or damage due to natural disasters, including interest and costs, with additions/deductions for NP’s costs and reinsurance settlement. The claims equalisation is performed separately for the individual claim years based on the year’s distribution formula until all the claims have been brought to a close.

§ 8 Settlement basis (distribution formula)

The basis used for settlement is the companies’ fire insurance amounts as of 1 July of the claim year. The calculation is performed using percentages with four decimals. Before the settlement basis is ready, the amounts as of 1 July of the previous year are used, and the distribution for the entire claim year is adjusted as soon as the final adjustment key is ready. For unvalued fire insurance the Board of the NP stipulates an average insurance amount on the basis of negotiations and this average is used for the distribution.

For companies that start or cease to underwrite fire insurance during a calendar year, an average of the company’s fire insurance amounts as of the last day in each quarter of the claim year is used for the settlement.

§ 9 Claim settlement

Claim settlement is made on a quarterly basis in accordance with the payment statements received. At the end of every quarter the NP sends a notice to each of the participating companies - separately for each individual claim year. - containing statements of:

  • payments made
  • remaining reserve
  • total payments and remaining reserves
  • company’s share of total damage or losses, payments and reserves
  • account statement showing what the company must pay or will receive as of the calculation date.

If according to the account statement the participating company shall make a payment to NP, such payment must be made no later than 2 weeks after the calculation date.

Company’s that are to receive money according to the account statement shall receive the funds within 4 weeks from the calculation date.

In the event of late payment a penalty interest is charged in accordance with Act no. 100 of 17 December 1976 relating to Late Payment, etc.

In exceptional cases the Board of the NP may decide to settle outside the stipulated quarterly settlements.

A year-end closing of the claim years shall be performed in connection with the settlement for the fourth quarter, and the NP’s operating costs and settlement with reinsurers shall be included.

§ 10 Settlement costs

The NP covers settlement costs such as assessment expenses, travel and subsistence allowances and necessary fees. In addition, the NP covers the settlement costs of the company in question at a rate of 3 per cent of the compensation amount including interest and costs, with a minimum amount of NOK 2000. For claims in excess of NOK 200,000 in connection with the same natural disaster 1 per cent of the excess amount is also calculated.

§ 11 Premiums

The premium rate is stipulated by the Pool Board, taking into account that the total premiums shall over time correspond to the NP’s and the individual company’s amount of loss and damage and administrative expenses.

The natural disaster insurance premium shall be collected by all companies at the same rate on the fire insurance amounts and specified as a separate item in the policies. For certain types of insurance where the natural disaster risk is included, the Pool Board may nevertheless stipulate that the insurance in question shall not be included in the settlement basis and thus not be charged separately for natural disaster insurance.

The company allocates in the normal manner its relative share of the claims reserve for unsettled claims that are to be regulated through the NP and an ordinary premium reserve based on the natural disaster insurance premium.

If the accrued premium exceeds the company’s share of the compensation payments that are made through the NP and the claims reserve for unsettled claims, then the difference shall be allocated to a special disaster fund in the company. This fund shall be used exclusively to cover future natural disaster claims.

If a company transfers its fire insurance business to another company, it shall transfer the natural disaster reserve and accumulated natural disaster fund to the other company.

If the company ceases operations, then all funds shall be transferred free of charge to NP for distribution among the participants in accordance with the settlement basis for the year in which the company ceases operations.

No commission shall be paid on the natural disaster insurance premium, nor shall it be settled through pro rata reinsurance treaties or facultative reinsurance.

§ 11 a Fees

Fees paid into the NP pursuant to Section 4 a of the Natural Perils Insurance Act shall be placed in a separate bank account. Fee funds (including accrued interest) shall be distributed to the participating companies in accordance with the settlement basis (the distribution formula) in Section 8. The companies shall allocate fee funds to the natural disaster fund set up in accordance with Section 11, fourth paragraph.

§ 12 Reinsurance

The Pool Board, cf. Section 15, takes out reinsurance on behalf of NP in accordance with the reinsurance principles that are approved at the annual meeting. The settlement with reinsurers is distributed in the same manner as the claim costs.

§ 13 Review

The Claims Committee, cf. Section 17, has the authority to review any claims that a company wishes to cover through the NP.

If the question of whether a natural disaster has occurred has been brought before the Government Natural Disaster Fund’s Board of Appeal pursuant to Section 2 first paragraph of the Natural Perils Insurance Act, cf. Section 4 of these rules, the Board of Appeals’ decision also determines whether the company is entitled to
having the claim covered through the NP. Furthermore, the Claims Committee may request that the participating companies renounce in full or in part their claim for distribution of claims that do not come under the scheme in the opinion of the Committee. In the event of a disagreement between the Committee and the company, it is the Board of the NP that decides whether the claim will be covered by the NP.

If the company indicates in writing that the Board is not suited to reaching a decision between the Claims Committee and the company, the case shall be settled through arbitration, cf. Act no. 25 of 14. May 2004, relating to Arbitration (The Arbitration Act). The president of the court of arbitration is the chief justice of the Oslo District Court or a person appointed by him. If the company is represented on the Board, its representative shall withdraw from the Board’s handling of the case.

§ 14 Annual meetings and member meetings

NP’s highest authority is the annual meeting and other member meetings. At the annual meeting and member meetings each company has voting rights corresponding to the distribution formula as of 1 July prior to the meeting.

The annual meeting is held every year no later than 30 June and is called by the Board with a written notice of at least 3 weeks to each member.

The annual meeting shall

a) Deal with annual report and accounts.
b) Elect a board, board chairman, deputy board chairman and auditor. The auditor must be government authorized.
c) Deal with other matters on the agenda.

Other member meetings are called to deal with special matters when the Board or at least one-fourth of the members request that a meeting held with at least one week’s notice.

§ 15 Board

The Board consists of 8 members with personal deputies. Board members serve for a period of two years.

The Board supervises the NP’s activities and its duties include:

  • Presenting the annual report and accounts
  • Stipulating premiums
  • Entering into reinsurance treaties
  • Supervising claims settlement
  • Appointing a claims committee.

The Board has a quorum when the chairman or deputy chairman and at least 5 board members or deputies are present.

§ 16 General manager

The NP’s general manager is the Norwegian Financial Services Association (FNH), which also has responsibility for day-to-day settlement of claims. Separate accounts are kept for administrative expenses that are charged to the individual claim years.

§ 17 Claims Committee

The Claims Committee comprises 5 members. Members of the Claims Committee serve for a period of three years.

The Committee shall perform the necessary review of the claims submitted by the companies for distribution, taking the initiative when necessary in connection with large claims when more than one company and/or the Natural Disaster Fund are involved in the same claim.

§ 18 Contact with the Government Natural Disaster Fund

The Claims Committee is responsible for the running contact between the NP and the Government Natural Disaster Fund.

The Liaison Committee between the NP and the Government Natural Disaster Fund is responsible for dealing with matters in which the parties have a common interest. The committee shall consist of three representatives from both parties. The committee shall hold a meeting every fourth month. Furthermore, a meeting shall be held when requested by one of the parties to discuss a matter of common interest.

The NP and the Government Natural Disaster Fund shall give each other the information that is necessary so that they can perform their duties.

These rules entered into force on 1 January 1980 and have been subsequently amended on 3 January 1983, 1 January 1989, 1 January 1995, 1 January 1998, 1 July 2001, 1 January 2003 and 21 December 2007.