Nat cat regime hampering flood resilience in France, experts say

The reliance on an efficient nat cat insurance regime may have hampered the development of flood resilience in France, according to experts. Participants in a roundtable about flood risks, organised by Commercial Risk and modelling firm ICEYE at the Amrae conference in Deauville, also said that many insurance buyers still have not grasped the urgency of investing in nat cat prevention, which includes taking measures to prevent and transfer flood risks. “The French market is built around the nat cat regime and CCR reinsurance, which evens out the playing field,” said Giovanna Santi, deputy director of midcorp at Allianz France. “Until probably 15 years ago, we did not make much of an effort into developing flood models.” France’s nat cat regime is managed by state-owned reinsurer CCR and is funded by a mandatory surcharge on property and motor insurance policies. The system has been under pressure for some years following significant increases in the volume of losses from events such as floods and droughts, raising questions over its financial health. Such fears have driven the government to raise the mandatory surcharge on property insurance policies from 12% to 20% in January. Christophe Gaudron, CEO of Guy Carpenter France, said that the increase solved one immediate problem, but not the long-term future of the system. Furthermore, he noted that the protection provided by the nat cat regime may have disincentivised firms from investing in protection measures against weather risks. “The nat cat regime aims to share the burden between the private and public sectors. Resilience is about more than that, however,” Gaudron said. In his view, France would be more resilient if there was more awareness about the actual price of risk and the impact it can have on society. The data shows that it is clearly time to invest more intensively in flood prevention, he suggested. Jean-Baptiste Regnier, the first party underwriting insurance director at HDI, pointed out that one of the lessons from recent flood events is the business community’s lack of preparation to deal with that kind of disaster. “Any technology system that could help an insurer to better anticipate and predict flood events will be welcome, as some clients are still missing on preparation that could help an insured,” he said. First of all, however, companies need to understand the severity of the risk and accept that it is rising in France. That is often not the case today, said Laurent Bonnet, head of captive and alternative risk transfer solutions at Marsh France. In his view, although nat cat risks are becoming more frequent and severe, clients still want to focus modelling exercises on risks they know well, such as machinery breakdown and fire. Mirka Vahtera, strategic accounts lead at modelling company ICEYE, noted that roughly 80% of nat cat damage nowadays in France is caused by flood events. The number includes both river rain floods and flash floods of the kind that caused devastation in the Spanish region of Valencia in October. Last year alone, 11,000 km2 of French territory was hit by floods, she said. More worryingly, ICEYE’s models show that the value of assets at risk of flooding in the country is set to double by 2030. Anke Sielker, the assistant vice-president of business development at ICEYE, stressed that the scarcity of data for modelling flood risk is a problem for the insurance industry. “There is a lack of data for models to be really granular. I mean, the path of a hurricane is so predictable, but floods are not,” she said. “Data is very scattered, and although the models are probably getting the overall picture, on a granular, local level, it is not enough. The lack of data to support models still strikes me.”

Nat cat regime hampering flood resilience in France, experts say

French asset values at flood risk set to double by 2030

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