Reinsurance tutorials #33
What is motor insurance?
Motor insurance encompasses own property damages and third party liability when using the vehicle. Motor insurance can be split into 3 different categories of coverage that are usually reinsured:
- The first, motor third party liability, covers the material and bodily injury damages suffered by third parties for which the insured (mainly the drivers, but not only) are found liable according to the civil laws of each country. Usually, this coverage is compulsory.
- Second, all property damages covering damages or losses arising out of a motor accident. Theft, fire, windscreen breakage, and others are also covered.
- Third, personal accident coverage of the vehicle occupants in case of disability or fatality.
Motor insurance is one of the major sources of premiums of the non-life insurers and reinsurers. All property damages and or personal accidents are not always reinsured. Motor third party liability is mainly reinsured through an excess of loss treaty and when the insurer purchases a proportional treaty, usually a quota share, it seeks a way to develop its motor portfolio.
The motor excess of loss treaty is on loss occurring basis. It is a long tail business. The treaty can include an unlimited layer; in particular in markets where unlimited coverage for bodily injury damages is compulsory, such as in France or in the UK.
According to the loss occurrence definition within the treaty, a motor accident with several victims or claimants, several vehicles involved, insured by the same Ceding party, can be considered as one single event. So, if we have a road traffic accident involving 3 cars and 8 injured or deceased for example; if the Ceding party insured 2 of the 3 cars; the Ceding party will open 2 claims for each car policy. But, from a reinsurance perspective, it will be one single claim.
In France, Motor business represents about 16% of the Non-Life reinsurance premiums, that is to say over 415 M€.
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