Nederlandse Herverzekeringsmaatschappij voor Terrorismeschaden (NHT, Netherlands Reinsurance company for terrorism losses) was established as a reinsurance company, entering into a reinsurance contract with each of its individual participants. The NHT pooling arrangement limits the total exposure to EUR1 billion per event per year for all lines. The process involves attaching the NHT clauses to the underlying insurance policies. The exposure for property business interruption risks is limited to EUR75 million per location per year. It is possible to insure excess amounts elsewhere. However, this has happened on a very limited scale.
Participating insurers, once having decided to become members of the NHT, are deemed to cede all their terrorism exposure to the pool. There is no obligation for an insurer to declare individual risks to the pool because the entire participant’s portfolio is “pooled.”
The NHT participants are charged for the reinsurance premium. The yardstick for distributing the reinsurance premium is the market share of the respective NHT member (applying its premium income as part of the total market premium volume).
The total NHT capacity for 2008 has been maintained at the level of EUR1 billion per year, according to the distribution below. If the overall loss exceeds the capacity of EUR1 billion, the indemnification to policyholders by NHT participants will be reduced proportionally to the capacity available. The NHT buys retrocession capacity from international reinsurers, as well as the Dutch government.
From January 1, 2006, public healthcare business (as far as written by the NHT members) also falls under the scope of NHT, due to the introduction of a basic healthcare coverage for all Dutch citizens. Excluded lines include aviation and aviation liability policies, as well as policies that have taken on terrorism as such. In order to be recognized as an event of terrorism, the NHT applies a franchise deductible of EUR7.5 million per event and per annum.
(The report includes all charts and exhibits)
Click here to have articles from this series delivered directly to your inbox.