Climate change, inflation and 
cyber top the risk list

Climate change has been forced to the top of the agenda in France after a torrid summer of extreme heat, fires and then severe rain and hailstorms, while inflation and cyber are also high on the risk list, according to Jean-Marie Haquette, country manager for France at HDI Global. He believes frank and open discussions between risk managers and insurers are vital to help find solutions that stand up to today’s volatile risk environment.

Unusual and extreme weather has become a leading issue for risk managers and insurers across France after a hot and stormy summer, which resulted in both devastating fires and floods.

Jean-Marie Haquette, the newly appointed country manager for France at HDI Global, believes that no one in the country can be left in any doubt about the impact of climate change after the torrid summer.

“We had huge fires across mainly the Bordeaux area in August, following a period of extreme heat. The fires raged over a land mass equivalent to six times the Paris surface and at European level to the surface of the island of Corsica. This was a huge shock to all of us but has made us realise what climate change means,” he said.

“It is now a risk that has moved to the top of the list because the summer did not just bring fire but also hailstorms that we have never seen before. The hailstorms that followed the summer heat are not something that has been properly modelled in the insurance industry and consequently really rated. We just did not expect to suffer this,” he added.

Haquette said there have been plenty of claims in the wake of the storms and, once more, these have highlighted the cost of business interruption (BI) in any insurance claim. “Again, we are seeing that the BI portion of the claim can be larger than the physical property damage. This year property claims are also being impacted by supply chain disruption which, of course, is increasing the BI claim,” he explained. 

Other risks

All this comes on top of a host of other risks that are worrying insurers and insureds alike. 

Near the top of that list is inflation. “We are doing relatively well compared to the rest of Europe but it is still set to have a big impact on our costs and our losses,” said Haquette.

The economic instability is rekindling fears that France’s Yellow Jackets might take to the streets once more, he continued.

“The risk management community is extremely worried about this. In the past, some iconic clients were affected. Think of the big brand names that line the Champs Elysees and the damage that was done before,” he added.

The third big risk highlighted by Haquette is cyber. “The threat of major cyberattacks escalated with the Ukraine-Russia war but coverage has been changing because the frequency of attacks was already so high. We do have a better idea of the cost of these abnormal claims – which are not so abnormal anymore – but it is the accumulation risk that is a big factor. We need to consider limits, wordings and deductibles if we are to manage these risks,” he said.

Systemic risks

Asked how Europe’s risk and insurance managers can more effectively identify, measure and mitigate so-called ‘black swan’ systemic risks, such as the next pandemic or global cyber meltdown, Haquette stressed that HDI Global is always keen to share information and best practice with clients. 

He will be working closely with French risk management association Amrae and the country’s insurance federation to assess new risks and come up with solutions. 

However, some risks might prove too large for insurers alone, he suggested. 

“Take cyber. A huge cyberattack affecting not just France but the whole world is not something insurers can take on alone. We are discussing this within the federation of insurers and with Amrae, and we do not have a solution as yet, but I am optimistic that we will have a way to better control cyber risk in France. In France, we have been able to come up with a solution for terrorism and there has been work done on a pandemic solution. Cyber is another such risk that we have to find a wider solution for,” said Haquette.

He is also confident that insureds and insurers have a better understanding of all their risks after three years of market hardening in France.

Renewals

Looking ahead to January renewals in January, Haquette said price rises are still likely. But he said risk managers also have a wide range of solutions open to them – including captives, parametrics and alternative risk transfer – that can help deliver financial security and improve understanding of risk. 

However, he has one word of warning for insureds. “Some risk managers are thinking about tomorrow, but no further than tomorrow. We are trying to encourage them to think in much longer-term views, which will help identify future risks. The good news is that we are receiving calls almost on a daily basis from those who are planning much further ahead and want to engage with insurers who are here for the longer term too,” said Haquette.

Transparency and honest discussions with clients remain key for HDI Global in France, said Haquette.

“We must have open and honest discussions with clients. We need to understand their risks and they need to understand how we can support them. I am confident that we have increasing numbers of well-informed and educated risk managers who are delivering a professional service to their employers and who can make the most of managing their risks through the insurance markets,” he concluded.