French minister urges insurers to speed up claims following €1.3bn storms

French insurers are coming under pressure to respond more proactively and quickly to the needs of citizens, farmers and businesses in the regions hit by storms Ciaran and Domingos, which caused an estimated €1.3bn of insured losses at the start of November.

Brittany, Normandy, Nord-Pas-de-Calais, Nouvelle-Aquitaine and Corsica were the worst-hit areas.

Bruno Le Maire, French minister of the economy and finance, visited Pas de Calais this week and said that he wants to see a swifter response from insurers to damage caused by the storms as a matter of “national solidarity”.

Le Maire said that the most pressing emergency is rehousing.

It is thought that the so-called Baudu law – introduced at the start of this year to reform the state backed compensation scheme CCR, and strengthen the rights of individuals by significantly broadening the coverage provided – will be enacted before it formally comes into force on 1 January 2024, to help deal with the latest disaster.

“We are ready to anticipate, alongside the state, the new arrangements for covering rehousing costs as provided for by the so-called Baudu law in the context of compensation for natural disasters,” Florence Lustman, president of the French insurance association, who was traveling with the minister along with representatives of AXA, Groupama and Pacifica, reportedly told local media.

Crucially this would provide all victims who need it with a six-month guarantee to cover rehousing costs via “an exceptional decree” that is catered for within the new law.

Le Maire also said that insurers need to speed up assessing damages and get their claims experts on the ground to expedite payments. “The experts must come quickly and not quibble, with an advance, not a handout,” he reportedly told press during the visit.

Lustman reportedly said in response that she had “invited” members of the French insurance federation to pay advances to affected policyholders in a matter of days following the first assessments of claims.

Just before La Maire’s visit, the association announced that the €1.3bn of losses from the storms would come from an estimated 517,000 claims.

Ahead of Le Maire’s plea, the federation said: “Insurers are fully mobilised alongside their policyholders to speed up compensation procedures and respond to their needs as quickly as possible.”

“In this trying time for disaster victims, insurers are mobilising to support them and process the influx of claims declarations as quickly as possible,” it added.

The federation said that Ciaran and Domingos rank as the fifth most devastating storms to hit mainland France, after Lothar and Martin in 1999 (€13.8bn), Daria, Herta and Vivian in 1990 (€3.4bn), Klaus and Quinten in 2009 (€2.6bn) and Xynthia in 2010 (€2bn).

Concerns are rising in France about the level of cat losses and the ability of the economy and its nat cat system to cope in the face of climate change.

The Bank of France carried out an assessment of climate change’s financial risks in 2021 and found that the most vulnerable French regions could experience a two to fivefold increase in natural hazards.

It forecast that insurance premiums would rise by 130% to 200% by 2060 to cover these losses, an increase of between 2.8% and 3.7% per year.

Le Maire and Christophe Béchu, France’s ecological transition minister, launched a task force in May of this year to look into the insurability of climate risks.

As the costs of compensation could reach €70bn over the next three decades, the French government wants “to guarantee the sustainability of the natural disaster compensation system”, calling it a “key resilience tool”.

The task force is due to present its recommendations to ministers in December this year.

The seriousness of the problem was further underlined by Jacques Le Pape, chairman of the board of directors of CCR, who explained that the state-backed reinsurer’s financial health was under stress against the backdrop of rising cat levels and wider financial strains in its 2022 annual report.

“In 2022, CCR fulfilled its mission by compensating, via the insurance companies it reinsures, French households that were victims of an exceptional drought. The intensity of the 2022 drought makes it the costliest event for the natural catastrophe compensation scheme since its inception. At the same time, CCR, like all insurance and reinsurance companies, had to face the return of inflation after a long period of price stability,” said Le Pape.

“Fortunately, the reserves built up over the last 20 years enabled CCR to absorb the exceptional burden resulting from each of these exceptional shocks. The €1.2bn total allocated in 2022 is of the same order as the one in 2017 caused by Hurricanes Irma and Maria,” he continued.

“However flattering, the positive outcome should not be misleading: CCR’s reserves absorbed these shocks but CCR now no longer has this stabiliser. Moreover, the impact of these claims is compounded by the significant depreciation of the bond portfolio caused by rising interest rates. However, the financial commitments made by CCR for the future, to support our fellow citizens who are victims of natural catastrophes, are still growing,” added Le Pape.

“Improvements have been made to the way in which claims are compensated, and CCR advised the government on these changes. Finally, the cost of the scheme will continue to rise under the long-term effects of climate change. The question of the scheme’s financial resources therefore arises now: the level of premium surcharge, currently at 12%, needs to be reassessed,” he said.