The main stages in GAREAT’s development are as follows:
– After the events of 11th September 2001, in New York, and the AZF explosion on 21st September 2001 in Toulouse, France, reinsurers generally excluded Terrorism coverage from their treaties, creating a need for a market solution in France.
On 1st January 2002, a public-private partnership between insurance companies, both professional associations FFSA (Fédération Française des Sociétés d’Assurance) and GEMA (Groupement des Entreprises Mutuelles d’Assurances), international reinsurers, and the French State established GAREAT, which arranged Terrorism reinsurance for risks known as Large Risks (at that time defined as risks with sums insured of 6 million euros or more).
In 2005, as Article L 126-2 of the Insurance Code made it mandatory to cover Terrorism risks in all Motor and Property Damage policies, regardless the methods of terrorists including CBNR (chemical, biological, nuclear and radiological) means and cyber-terrorism (if resulting in physical damages). Consequently, GAREAT established a second section in order to cover risks below 6 million euros.
In 2010, the threshold for ceding risks to the Large Risks sections increased to 20 million euros. To continue providing reinsurance coverage under GAREAT for Members, the second section currently known as Small and Medium-sized Risks section, expanded to reinsure risks with sums insured from 6 to 20 million euros.
Cession to the Large Risks section remains mandatory for members of France Assureurs (Current French Association of Insurers grouping ex FFSA and GEMA) and for companies wishing benefit from the French State’s unlimited guarantee. This backstop is global and applies to all Members for several years. Its renewal and activation threshold are negotiated with the French Treasury and professional association to meet market needs.
Cession to the Small and Medium-sized Risks section remains optional. Until 2012 each company individually negotiated an unlimited treaty with CCR , with thresholds specific to each company. Since 1st January 2013, following a French State decision to set a uniform threshold of 20 million euros per cedant, GAREAT, under instruction from its Members, negotiates with CCR (which applies the French State’s unlimited guarantee), an unlimited treaty consisting of multiple groups. Each group includes one or more Members, who may be grouped as necessary so that their collective thresholds meet the minimum required by the French State for triggering the unlimited guarantee.