Surety & Housing
Housing Cooperatives
The cooperative housing promoting projects’ main characteristics are:
- The project lasts longer than a normal housing promoting project.
- There is an estimated activity calendar, therefore, and in general, there are not set dates for its development.
- The final duration of the cooperative housing project is, normally, much longer than that for a private housing project.
From HCC Europe's point of view, such characteristics imply the technical impossibility for the cooperative in charge of developing the housing project to buy a Housing Insurance Policy under Act 57/68 at the initial date of such project. At that moment, and in most of the cases, there is NOT a sale of the house, but the adherence by the cooperative member to a Cooperative Society that will allow him/her to have a right to be awarded the future house whenever the project is technically mature. This means that at that moment it is impossible to determine, not even by approximation, the real delivery date of the house to be awarded. Both factors, the identification of the purchased house in the buying and sale agreement and the estimated delivery date are essential for the insurance company to take on the Housing Insurance risk but, as those factors do not exist in the Cooperative Housing project, it is not possible to issue a housing policy according to the Act 57/68.
Considering all the above, and with the only aim to ease the pacific development of a cooperative housing project from its start, the solution developed and applied by HCC Europe and other insurance and banking companies, lies in issuing two insurance contracts completely differentiated, with characteristics, insured object and pursued purposes radically different:
a) Voluntary Surety Insurance for Housing Cooperatives
b) Housing Policy (under act 57/68 and other concurrent resolutions) for Housing Cooperatives
The main aspects of the Voluntary Surety Insurance for Housing Cooperatives are:
- It is a Surety Insurance Policy in which the Cooperative Society responsible for the promoting Project is the policyholder and the Cooperative Members adhered to it are the insured
- It is a VOLUNTARY insurance policy for the policy holder – the cooperative society – as, considering the nature of its relationship with the cooperative members at the starting date of the project, there is not a legal act nowadays that makes it compulsory to contract.
- THE EXCLUSIVE OBJECT to be covered by this insurance policy is to guarantee that the money that the cooperative members relinquish to the cooperative in the monitored operating bank account will be used fully and solely to pay the costs of the housing project at hand, project whose holder is the Cooperative Society.
- The Voluntary Insurance is renewed ANNUALLY, and will stay originally in force until the requirements set in the risk acceptance letter issued by the Insurer are met, as they allow the issuing of the subsequent and compulsory housing POLICY, including any circumstances that, fully detailed in the voluntary insurance policy, may imply the anticipated cancelation of the coverage, such as possible and unforeseen aggravation of the risk.
- It is an essential requirement that the Insurance Company intervenes the operating bank account in which the cooperative members deposit their payments. With this intervention the Insurance Company will have to previously authorize each payment that the Cooperative Society has to make within the development of the housing project.
- This Insurance Contract only guarantees the DOWNPAYMENTS made by the cooperative members and does not cover the potential financial interests of such deposits.
- This Policy does NOT guarantee, at any rate, the feasibility of the promoting Project, whose responsibility underlies exclusively on the Cooperative Society, its Governing Body and the General Assembly of the cooperative members, as independent legal bodies, real decising core of its own destiny.
The policy ENDS and is CANCELLED if:
- The cooperative society gives up the promoting Project.
- The Project ends as failed, without any existing deviations in payments done to finance issues that differ from the financing of the promoting project.
- The fulfillment of the technical requirements needed for the analysis and potential underwriting of the Housing Policy (Act 57/68) is proved. In this case, the Insurer assumes the compromise to analyze and issue the new insurance policy, if such requirements are met, applying in its case a potential commercial discount in the final earned premium for this new policy that might reach up to 80% of its mathematical calculation. This discount is analyzed and proposed case by case.
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