Studies the catastrophe insurance monopoly in Spain, the Consorcio the Compensacion de Seguros. It is shown that the Consorcio operates with exceptionally low administrative costs. It is able to offer a very low cost insurance cover in a domain, where competition would usually lead to market failure due to problems of adverse selection. The existence of the Consorcio is in contradiction with the 3rd EU guidelines on the insurance market. However, Spain managed to get an exemption.
Keywords: adverse selection, catastrophe insurance, EU-legislation, Spain, state monopoly,