AMRAE celebrates boost to captives in France as mandatory PPP scheme postponed
France’s risk management association AMRAE has welcomed plans by its government that should make it easier to set up captives and other self-insurance strategies in France. The announcement from French economy minister Bruno Le Maire also made clear that any public-private partnership (PPP) scheme in France for pandemic risk will not demand mandatory premiums.
Mr Le Maire revealed an agreement with the French insurance market that aims to mitigate problems faced by companies affected by lockdowns and other effects of Covid-19. It is targeted at firms in the hospitality, tourism, sports, culture and event sectors.
The agreement means that companies in these sectors will get a rate freeze on all-risk insurance policies in 2021. In addition, coverage won’t be automatically voided for those that fall into premium payments arrears.
The agreement was announced after weeks of wrangling between the government and the insurance market. Some insurers complained of being blackmailed by the authorities.
Mr Le Maire also announced that a planned PPP scheme in France for catastrophic risks, including pandemics, will not include new mandatory coverages for companies.
“I have listened to the concerns of all companies, SMEs, micro companies, mid-sized firms and large corporations, which do not want new charges and believe that, in the current period of economic crisis, a new charge would be simply unbearable to them,” he said.
“Therefore, there will not be a mandatory pandemic insurance coverage, but there will be the possibility, for all those who want it, to build up provisions that will benefit from a fiscal regime that is particularly advantageous, and will enable them to simply put some money aside when the times are good, in order to use it again under particularly beneficial fiscal conditions, if a new pandemic comes along,” he added.
AMRAE welcomed this news and said it creates better conditions for companies that want to set up captives in France or retain more risks on their balance sheets.
It has been trying to convince government to facilitate the creation of captives in France and put in place other measures to boost risk management, in order to help the country bounce back from Covid-19 and ensure insurance buyers can better deal with the hard commercial insurance market.
These strategies would help companies prepare for future pandemics and other systemic risks, such as cyber or climate change, that can cause widespread non-damage business interruption losses.
Changes will have to be made France’s accounting rules, and potentially its insurance code, to help develop captives and other forms of self-insurance.
Commenting on Mr Le Maire’s plans, Brigitte Bouquot, a vice-president of AMRAE, said: “It is a very important point on the fiscal side. It is clear that the government prefers to resume efforts with an angle that is a little different from traditional angles that were discussed beforehand, such as a mandatory insurance scheme via a public-private partnership or a new insurance tax.”
It is still not clear how the changes will be implemented, she noted. But the move is timely because self-insurance solutions are set to become more important in France.
“To face systemic risks, it is necessary to strengthen prevention, and also to strengthen the self-insurance side, in order to deflate what will be transferred to the market,” she said.
Adding: “After that, only residual risks are transferred to the market. The assumption that you can only worry about the development of your business, while all the risks are insured, is no longer valid.”