French Protection Covers Against Natural Disasters

French Protection Covers Against Natural Disasters

Summary 1. French exposure 2. Nat Cat insurance penetration 3. French Protection Covers Against Natural Disasters 4. The French National Disaster Compensation Scheme Principles 5. Conclusions 2

French exposure 3

What perils menace France? French territory is exposed to almost all natural perils Windstorms and hurricanes Floods Landslides (including subsidence) Earthquake Avalanche 4

Nat Cat insurance penetration 5

Insurance Market in France Key Figures Combined premiums 188,3 billion EUR in 2014 19.7 30.6 Source : French Federation of Insurance Companies (FFSA) 6

French Protection Covers Against Natural Disasters 7

Natural perils-what kind of cover? 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 - 1964 Law) The National disaster compensation scheme (1982 Law) Why perils are covered under specific compensation schemes: Lack of statistics and large mutualisation, Risk of accumulation and anti-selection 8

The French National Disaster Compensation Scheme Principles 9

Bases and principles The French natural disaster scheme was created by the law of 13 July 1982. It was introduced to make up natural disasters inadequate cover. This natural disasters cover provided until then only very low levels of insurance. It is not a true insurance scheme but a compensation scheme based on a public-private partnership. It is based on paragraph 12 of the preamble of French Constitution, which states : «The Nation declares all French Citizens to be equal and united in solidarity when faced with loss resulting from natural disasters» Solidarity and responsability Scheme principles Public-private partnership Widespread coverage Guarantee solvency and sustainability Stability : State garantee 10

Main characteristics of the Natural Catastrophe scheme 1/2 Conditions for the scheme to operate : A state of natural catastrophe must be declared by the Government, by way of decree (signed by different ministries after consulting an inter-ministerial committee) The damaged property must be covered by a property damage insurance policy Automatic inclusion of the Natural catastrophe guarantee in insurance contracts covering damage to buildings and moveable property located in France Perils generally covered: floods of any kind, mudslides, earthquakes, landslides (including subsidence), tidal waves and tsunamis, avalanches, volcanic eruptions cyclonic winds (greater than average windspeed of 145 km/hour or gusts of 215 km/hour). This enumeration is not exhaustive. 11

Main characteristics of the Natural Catastrophe scheme 2/2 Rating Deductibles Fixed by the State: Compulsory and cannot be bought back Since 1st January 2001, deductibles can be modulated for municipalities without risks prevention plans The additional premium rates are fixed by the State by way of decree Private lines Corporate 1 or 2 decrees: basic deductible Current rates: Property other than motor vehicles : Property 380 Property 10% minimum 1140 3 decrees: doubled deductible 12% of property premium Motor vehicles : Subsidence 1 520 Business Interuption 3 working days minimum 1140 4 decrees: tripled deductible 6% of theft and fire premium (or, failing this, 0,50% of the damage premium) Subsidence 3 050 5 decrees or more : quadrupled deductible 12

CCR and ONRN: private public partnership with French State and insurers What is the French National Observatory for Natural Risks (ONRN)? It is a public private partnership arrangement signed in May 2012 by : The French Government represented by its ministry of Ecology, CCR, main reinsurer of the French compensation scheme for natural disasters, Mission Risques Naturels, an association dedicated to risk knowledge and reduction, between two French professional trade associations, FFSA and GEMA. Objectives: To improve and capitalize knowledge on natural hazards, exposed inhabitants and assets To contribute to the management and governance of risk prevention To enhance economic analysis of prevention and crisis management To improve risk culture at national and local levels The website www.onrn.fr was opened to public in March 2013, in order to : Gather and provide available data on natural hazards in France. Publish indicators drawn up by the ONRN, based in particular on data provided by the insurance sector. 13

Conclusions Necessary pre-requirements for the effective coverage CATNAT: High level of property insurance penetration Large scope of cover Large mutualisation Affordable price Regarding protection of both frequency and intensity: Public private partnership Risk Prevention Plans Data, research and information 14

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Thank you for your attention Malgorzata Sroka-Picot: msroka@ccr.fr CCR 157, boulevard Haussmann - 75008 Paris - France - 01 44 35 31 00 - www.ccr.fr