New Tort Rules in Hungary

(This following post is provided by Szabolcs Dispiter and Péter Mitták in the Budapest office of CMS Cameron McKenna LLP. I appreciate their contribution and keeping us aware of these issues.)

Liability for civil wrongs (torts) is to be governed by new rules in the new Hungarian Civil Code.

There will no longer be the same degree of similarity between liability for tort and for breach of contract as there is in the current Code.

The new rules will clarify current provisions as well as adding new ones. The general position will be that individuals are liable for damage caused to others:

• unless they can show that their actions were to be expected in the circumstances
  
• but only for damage that could be foreseen at the time it was caused or was caused intentionally or by gross negligence
  
• a 'prejudice fee' will be payable (instead of damages on the normal basis) to compensate for any damage that does not have a monetary value, such as the loss of an arm or the violation of a personal right
  
• there will be special rules for torts such as product liability and liability for environmental damage which are currently regulated in separate legislation
  

The new Hungarian Civil Code is now in its final phase of development since work began over 10 years ago. The text is likely to be finalised early next year by the Hungarian Parliament, although a number of details have yet to be decided.

Forecast for Market to Harden in 2009

For those readers of this blog who may not be familiar with insurance business, and how pricing for the product hardens or softens, the following news illustrates why many of us are telling Clients to expect increases to their insurance program in 2009:

From BI Europe.com:

Reinsurers report higher combined ratio

By Judy Greenwald
Dec. 01, 2008

Twenty U.S. reinsurers surveyed by the Reinsurance Assn. of America reported a 104.2% combined ratio for the nine months ended Sept. 30, compared with 94.1% reported by a comparable group for the same period a year ago.

The 2008 combined ratio reflects a 75% loss ratio and a 29.2% expense ratio, according to the Washington-based RAA.

The reinsurers wrote $19.01 billion of net premiums written for the nine months, a 6% increase from the total reported by the comparable group. The 2008 policyholder surplus was $72.07 billion.

Oftentimes, our Clients engage us in the discussions as to 'Why are my premiums going up when I haven't had any losses?' These are never easy discussions because frankly, our individual Clients are just one component of a very large network of financial transactions, not the least of which is the reinsurance market. For the novice, the easiest way for me to explain is that the costs of insuring you are increasing, and these costs are being passed along. This is not different from many of the other products you buy. When the cost to manufacture and deliver your product rise, you must pass along the cost to your buyer. The unique component of insurance is that the cost to produce insurance coverage today may not be realized until several years from now.