French market mixed—rates up in personal lines but commercial risks flat

Aon Benfield said that original rates for personal lines business in France are expected to increase by 5% for motor and property lines of business following ‘difficult’ market conditions between 2008 and 2010. It noted that Windstorm Xynthia led an unexpected storm surge and was characterised by two loss types, that each represented about 50% of the total. Xynthia caused reinsured wind loss and natural disaster loss as defined in the French natural disaster loss law that was enacted in 1982. The broker noted that this created coverage for flooding, landslide, drought, avalanche, earthquakes and the like. Wind, however, is not a covered peril under the natural disaster loss law and is reinsured separately in the market. Property catastrophe layers were mostly unaffected, with the exception of those layers that combined wind and natural catastrophe losses, stated Aon Benfield. hide“Xynthia created a further focus on all peril aggregate covers by primary insurers, which generally benefit from the recoveries provided by property catastrophe programmes, encouraging them to buy more limit in the aggregate covers than is already widely purchased. Catastrophe aggregate covers represent approximately 10% of the total catastrophe capacity purchased,” explained the broker. The consequence of this meant that catastrophe aggregate covers were the only difficult renewals to place, said Aon Benfield. For the more traditional French property cat programme, the broker noted stable to decreasing total sums insured which it said generated pressure from cedents to achieve ‘substantial decreases’ and an overall discipline from the market. Overall, the pricing trend is stable or slightly decreasing by less than 5%, said the report. Rival reinsurance broker Guy Carpenter said that the rates on line for loss-free French property catastrophe programmes were relatively stable at this year-end in France, as they were at the January 1, 2010 renewal. Willis Re reported falling property catastrophe rates for the French reinsurance buyers. It said that it saw a price reduction on a risk-adjusted basis from 5–8%. This was driven by the entry of new players with significant capacity, said the broker. On a per risk basis the pricing was very much linked to the individual companies’ results but there remains high appetite for this type of cover this year, said Willis. According to Aon Benfield an even more remarkable decrease in rates was offered by the French terrorism pool Gareat that cut rates by around 10%. One area that was not so positive for reinsurance buyers was motor. Aon Benfield said that indications for renewals suggest an overall price increase of 3–5% because of a worsening development pattern and fall in the expected financial income. Willis Re said that reinsurance casualty prices for general casualty business in France were stable or even slightly higher at this renewal. Willis said that general third party liability and professional indemnity pricing was stable even with lower investment income available to carriers. Medical malpractice prices increased slightly, despite increased capacity and pricing for construction was stable again despite capacity increases for high value projects, said Willis Re. The French insurance market has become increasingly aggressive about Solvency II in recent times and stepped up its lobbying efforts to try and tone down the new capital adequacy regime for the market. French insurers say that they are particularly concerned about the impact that tight new rules could have upon their ability to invest in the French stock market and this could have a serious negative impact on the wider French economy. But Solvency II has not had an impact on the pricing environment so far, according to the brokers. “So far Solvency II has had a limited impact on the reinsurance purchase in the French market,” reported Aon Benfield.

French market mixed—rates up in personal lines but commercial risks flat

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