SOAT reforms could change reinsurance scheme

Tuesday, April 14, 2009

Reforms to Ecuador's mandatory traffic accident insurance (SOAT) scheme that are being discussed would include changes to reinsurance schemes, local press reported.

One of the proposals is that the traffic accident fund known as Fonsat acts as reinsurer of the SOAT scheme.

An investigative report by banking and insurance watchdog SBS detected irregularities in SOAT-related reinsurance contracts, local paper Expreso reported.

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The current SOAT law, which came into effect in January 2008, states that 78% of SOAT premium income is kept by insurance companies, while the remainder must be transferred to Fonsat.

Of the 22% of SOAT premiums it receives, Fonsat uses 16.5% to pay claims to victims of traffic accidents caused by unidentified vehicles or those that do not have SOAT insurance, and the remaining 5.5% for SOAT information and safety campaigns.

In 2008, insurance companies reported US$83mn in SOAT premiums, of which US$18.4mn was transferred to Fonsat and US$65.1mn was kept by the companies. Insurers ceded US$38.9mn to reinsurers in the year.