French Protection Covers Against Natural Disasters. P. Tinard Sr. Cat Modeler R&D Technical Studies Public Reinsurance

Transcription

1 French Protection Covers Against Natural Disasters P. Tinard Sr. Cat Modeler R&D Technical Studies Public Reinsurance

2 Agenda - Highlights on the French context - Main characteristics of the Nat Cat compensation scheme - French exposure to natural hazards - Summary of 30 + years of Nat Cat compensation in France

3 What is CCR (Caisse Centrale de Réassurance)? o Public reinsurer owned by the French State, created in 1946 Provides to insurers, operating in France, coverage against natural catastrophes and uninsurable risks French natural disaster compensation scheme (law of 07/13/1982) CCR is accredited to provide State-guaranteed with unlimited reinsurance coverage for: reinsurance of natural disaster risks reinsurance of terrorist acts reinsurance of exceptional risks linked to a shipment o CCR is also in charge of accounting and financial management of some public funds on behalf of the French State o CCR-Re (CCR affiliate) : Full-service reinsurer company operating on French and international markets in the life, non-life and specialty lines of business

4 Highlights on the French context

5 Insurance Market in France Key Figures Combined premiums ~188 billion EUR in ,7 30,6 Source : French Federation of Insurance Companies (FFSA) 5

6 Natural Hazards Coverage France has split natural hazards in two types Risks which can be covered by facultative or compulsory insurance with explicit contactual conditions Storm, hail, snow pressure, freeze Risks requiring specific compensation schemes All others (floods, earthquake, landslides,...) Public funds (National Fund for Agricultural Disasters Law) The National Disaster compensation scheme (1982 Law) Nat Cat Why perils are covered under specific compensation schemes? Lack of statistics and large mutualisation, risk of accumulation and anti-selection 6

7 Natural Hazards Coverage France has split natural hazards in two types Risks which can be covered by facultative or compulsory insurance with explicit contactual conditions Storm, hail, snow pressure, freeze Risks requiring specific compensation schemes All others (floods, earthquake, landslides,...) Public funds (National Fund for Agricultural Disasters Law) The National Disaster compensation scheme (1982 Law) * Out of the scope of the Nat Cat Compensation Scheme 7

8 Main characteristics of the Nat Cat scheme

9 Main characteristics of the Nat Cat compensation scheme 9

10 Main characteristics of the Nat Cat compensation scheme Perils generally covered: floods of any kind (surface runoff, overflow, groundwater flooding etc.) mudslides earthquakes landslides (including subsidence due to drought), tidal waves and tsunamis avalanches volcanic eruptions cyclonic winds (greater than average wind speed of 145 km/h or gusts of 215 km/h) This enumeration is not exhaustive 10

11 Main characteristics of the Nat Cat compensation scheme Solidarity with an uniform rating fixed by the State by way of decree Prevention linked to deductibles fixed by the State: compulsory and cannot be bought back Since 1st January 2001, deductibles are increased for municipalities without risks prevention plans Current rates: Property other than motor vehicles : 12% of property premium Motor vehicles : 6% of theft and fire premium (or, failing this, 0,50% of the property premium) Private lines Property 380 Subsidence Corporate Property 10% minimum 1140 Business Interuption 3 working days minimum or 2 decrees: basic deductible 3 decrees: doubled deductible 4 decrees: tripled deductible Major Natural Risk Prevention Fund named Barnier Fund: Rate: 12% of Natural Catastrophe s rate Subsidence decrees or more : quadrupled deductible 11

12 The Nat Cat Compensation Scheme in action 12

13 French exposure to natural hazards

14 French exposure to natural hazards o Almost 90 million policies collecting approx. 1.6 billion every year o A common citizen pays about 20 / year to benefit from the Nat Cat insurance coverage o Total insured values in France for dwellings and businesses: approx billions Insured Risk Number of policies Nat Cat premium Mean premium (million) ( million) per risk ( ) Dwellings Businesses Agricultural 0, Automobile Total estimation 14

15 French exposure to natural hazards River flood Terrain subsidence ~12 % of properties & businesses exposed ~17 % of properties & businesses exposed Groundwater flood ~18 % of properties & businesses exposed Hurricanes 15

16 French exposure to earthquake Seismic Hazard Number of municipalities Number of policies (a) Population (in thousands) (in thousands of inhabitants) Dwellings Businesses Dwellings Estimated insured value (a) (in euro billions) Direct damage Businesses Business interruption Weak Light Moderate Strong Severe (b)

17 Summary of the Nat Cat compensation in France

18 Summary of the Nat Cat compensation in France Almost all of the municipalities in France have been eligible at least 1 time for Nat Cat compensation regardless of hazard. More than recognition decrees since

19 Summary of the Nat Cat compensation in France ~670 recognition decrees since ,3 % of all Nat Cat recognition decrees 19

20 Claims compensated within the Nat Cat Scheme approx bn compensated including automobile 830 million compensated on yearly average Important variability depending on year Most costly year: 2003 but cumulated loss ( 3 bn) are far from possible loss due to a major event (earthquake or flood) 20

21 Earthquake in France within the frame of the Nat Cat compensation scheme o Limited loss due to earthquake since 1982 in France: claims recorded in database approx. 320 million cumulated loss (in 2015) 1,3 % of all claims compensated in amount 7 main events ; top 3 events account for 85% of all loss experienced 21

22 Potential loss due to Earthquake in France o Destructive events in historical records o Potential loss up to tens of bn Insured Loss : 11 to 14 bn (CCR, 2014) Important need to make reserving to deal with extreme events 22

23 Insured loss vs. Economic loss o Within the scope of the Nat Cat compensation scheme, only Direct Damages and Business interruption to Properties suffering a direct damage are compensated. o The Nat Cat scheme excludes all Indirect Damages: Contingent Business Interruption, Emergency response costs, macroeconomic effects, Indirect economic losses (loss of added value), as a function of direct losses (Hallegatte, 2008) Event Insured Loss Global Loss Weight of Insured Loss ( million) ( million) on Global Loss Vaucluse % Nîmes % Aude % Rhône % Total % Example for France, based on flood (extract) 23

24 Concluding remarks o Unique Public Private Partnership o Provides an affordable coverage ( on yearly average for a dwelling) o More than 25 billion compensated since 1982 o Almost all of the municipalities have been eligible at least 1 time for Nat Cat compensation o Exceeding premiums are reserved for potential extreme events o Permanent need to ensure longevity of the compensation scheme to deal with future challenges, climate change especially 24

25 Thank you for your attention