Stock exchange policies

In July, the xtreme rainfall and flooding in Limburg caused a lot of damage.  Most private and business claims are covered. At the moment, however, we see a small number of companies and institutions with a stock exchange policy that does not   include damage caused by flooding of small rivers and streams . What's up with that? 

Private individuals are usually well insured against damage caused by rainfall and flooding of smaller rivers and streams, such as the Geul and the Gulp. Entrepreneurs can now also take out good insurance for this, but not (yet) with every insurer. Regular insurers generously pay aggrieved entrepreneurs in Limburg for uncovered flood damage caused by small rivers and streams. This is different with a stock exchange policy. 

What is a scholarship policy? 

In the (large) business insurance market, very complex or financially extensive risks are usually insured. So extensive that the risks are too great to be borne by one party. That is why there areseveral, often international parties in this market , the so-called 'risk bearers'. Each party subscribes to a policy for a certain percentage and also contributes to the compensation with that percentage in the event of damage.  

How does a stock exchange policy come about? 

A stock exchange policy is concluded by a company or institution, possibly in consultation with its own financial advisor, through an insurance broker. The broker draws up the conditions based on a risk assessment. The starting point for this are the so-called VNA B model conditions, which are tailor-made for the customer . It then seeks cover from several parties on the (inter)national market. Risk bearers from all over the world can subscribe to a percentage. Most insurers and insurance brokers active on this stock exchange are members of the Vereniging Nederlandse Assurantie Beurs (VNAB). 

Why is flooding not covered on a standard stock exchange policy? 

Floods of small rivers and streams are not covered by the aforementioned model conditions on business stock exchange policies by default. A company or institution can, in consultation with its own financial advisor, decide to additionally insure flooding and precipitation. It is up to the organization and its financial advisor to make an appropriate assessment. Insurers, in turn, decide whether to accept the risks thus offered under those specific conditions.

In Valkenburg there are a number of companies and institutions that have insured themselves through a financial advisor through a stock exchange policy, without extra coverage for the precipitation and flood risk. This creates distressing situations and affects not only aggrieved entrepreneurs, but also the local community that depends on them. 

Why is there no generosity in a scholarship policy? 

Exercising generosity or leniency on a stock exchange policy is difficult if not impossible, because there are several, often international, parties, each with its own policy and considerations. As a result, it is less easy/impossible to deviate from the specifically agreed stock exchange conditions. 

The Association has no influence on policy conditions (due to competition) and cannot make statements about individual legally binding contracts. In the event of disputes, contractually established complaint procedures apply and one can possibly go to court.  

Hedging flood risk as an entrepreneur 

Due to climate change, the risk of extreme rainfall and flooding in the Limburg region will be five to ten times greater  this centurycompared to the current situation. In other regions, too, there is an increasing risk of extreme weather, resulting in floods and droughts. That is why the insurance market is developing strongly and there are more and more providers who insure flooding of small rivers and streams.   

It is especially important for entrepreneurs to make a conscious choice, assisted by their financial advisors and insurance brokers. In order to increase awareness among entrepreneurs, the Association developed the toolkit 'SME Climate Proof' in 2018 . In addition to the infographics developed in collaboration with the Ministry of Infrastructure and Water Management, the toolkit also contains prevention tips and explanations for entrepreneurs to easily compare insurance products with each other.  

Cooperation to improve insurability

In Valkenburg, the Dutch Association of Insurers spoke to and saw entrepreneurs who thought they had coverage, but turned out not to be adequately insured. The Association also saw entrepreneurs where the question is why they were insured on the stock exchange instead of through a regular insurer. The answer is that regular insurers sometimes set additional (preventive) requirements and that the customer preferred not to. That is a pity, but it also raises the question of whether an entrepreneur sees the risk of flooding sufficiently. Together with the VNAB (Vereniging Nederlandse Assurantie Beurs), the Association is now conducting a number of studies into the insurability of secondary flood defences. Investing together also means that we may be able to take a run-up to more insurability of flooding together.