On April 2nd, three experts, Thierry Langreney, Myriam Mérad, and Gonéri Le Cozannet (coordinator of CoCliCo), presented a report on insurance and climate change to the ministers responsible for Ecology and Economics in France, Christophe Béchu and Bruno Le Maire. 

This comprehensive report delves into the adaptation and mitigation challenges facing the insurance sector in France, exploring the issue’s financial, economic, and social dimensions.

This report presents 11 main objectives accompanied by 37 recommendations aimed at improving France’s insurance policies concerning natural disasters and climate change. These objectives cover various aspects, such as:

• Ensuring financial sustainability
• Supporting poor households in high-risk areas
• Preserving risk-sharing across territories
• Protecting against extreme weather events
• Guiding insurers’ prevention actions
• Strengthening prevention financing
• Investing in risk awareness
• Developing a national association for risk prevention. 

Key Recommendations

The recommendations propose specific measures, including adjusting surcharge rates, improving risk mapping, enhancing prevention incentives, standardizing reinsurance terms, and promoting green insurance offerings, among others.

A key recommendation from the report is creating a harmonized, broad-scale multi-hazard map to address major climate risks in France, particularly coastal flooding. This map will serve multiple purposes:

• Assessing whether insurers are withdrawing from high-risk areas.
• Establishing a taxation mechanism to incentivize insurers to continue coverage in high-risk areas and penalize withdrawals.
• Identifying areas where strategic investments in accommodation are essential.
• Strengthening regulations on accommodation and sustainable land use management.
• Offering support to vulnerable private property owners through public funding for risk prevention.

CoCliCo’s work on hazard and risk mapping, especially regarding coastal flooding, can significantly contribute to developing such a comprehensive map. Importantly, the insights and recommendations from this report are likely applicable in other countries, particularly those with insurance industries backed by public reinsurers, such as Spain.

This user story exemplifies how broad-scale flood mapping, despite its inherent uncertainties, can be crucial in supporting sector-specific adaptation strategies and policy development, such as in the insurance sector.

Read, Listen, or Watch to Learn More

To learn more about this report and its implications, you can access it here (in French only)

If you prefer to listen or watch, Gonéri presented the key findings and implications of the report on radio and national television. Both are in French. 

Full List of Objectives: 

Objective 1: Ensure the recovery and sustainability of the compensation scheme for natural disasters.

• Increase Cat Nat surcharge rates rapidly to bolster financial resources by €1.3 billion annually.
• Establish an automatic indexation mechanism for the surcharge rate to address climate change effects.
• Index legal deductibles to the construction cost index.

Objective 2: Consolidate areas of major exposure to climate risks to enhance accountability.

• Consolidate a map of high-exposure areas shared between the State, CCR (French Public Reinsurer), and insurers.
• Strengthen incentives for risk prevention in high-exposure zones for professional risks, second homes, and rental properties.
• Adapt and standardize CCR reinsurance terms for insurers in overseas areas.

Objective 3: Preserve risk-sharing guaranteed by the “Cat Nat” regime across the entire territory.

• Develop a mechanism for levelling technical margins between low- and high-exposure areas.
• Disseminate a comparison of home insurance market shares nationally and in high-exposure areas.
• Advocate for regulatory clarity at the European level to avoid demutualization in highly exposed areas.

Objective 4: Protect the State and CCR against the consequences of extreme weather events.

• Consider retrocession to private reinsurers for peak risks while respecting governance agreements.
• Raise regulatory ceilings for equalization provisions.

Objective 5: Guide insurers’ prevention actions with an appropriate adaptation catalogue for the French context.

Objective 6: Strengthen financing to prevent major natural hazards and anticipate coastal adaptation financing.

• Prioritize investments and subsidies from FPRNM (national funding scheme for risk prevention) to maximize returns.
• Create a new fund for individual prevention measures with a 12% levy on additional contributions.
• Extend the fund’s scope to include R&D and resilience diagnostics.
• Study the creation of a fund for relocating properties exposed to erosion.
• Support public and private insurance investment in expertise, R&D, and nature-based solutions.

Objective 7: Invest in developing risk awareness and appropriate prevention measures.

• Strengthen training for local officials, professionals, and decentralized state services in natural disaster risk prevention.
• Strengthen data sharing and disaster risk awareness
• Improve the granularity of information, ergonomics, and recommendations on the Géorisks platform.

Objective 8: Consolidate a national prevention association for natural risks with the contribution of insurers

• Strengthen and expand the AFPCNT (a national association on risk prevention) or drive an initiative for insurers.
• Facilitate access for individuals to risk and resilience diagnostics, public aid, and financing solutions via a management platform.
• The association promotes mechanisms for acculturation and training in climate risks and resilience.

Objective 9: Develop and support investment in building resilience

• Strengthen laws to secure the regime’s balance and impose geotechnical studies and soil-structure interaction studies.
• Make work damage insurance obligatory for real estate transactions in high-exposure areas.
• Strengthen monitoring of compliance with regulations for major risk prevention plans.
• Develop a co-financing system for resilience diagnostics by the FPRNM and insurers.
• Require post-disaster resilience diagnosis in high-exposure areas.
• Consider deploying a zero-interest loan for risk prevention work and advance public aid directly to contractors.
• Consider deploying a tax credit for individuals carrying out risk prevention work.
• Impose and monitor the obligation to reduce vulnerability in high-exposure areas.
• Allow insurance compensation at market value plus a premium for relocation in serious incidents.

Objective 10: Align reinsurers with the requirements of the CRD6 directive

• Defend an evolution and application of the Solvency 2 directive in line with CRD6/CRR3 requirements.
• Ensure readability and consistency of insurers’ transition plans.
• Strengthen the role of ACPR recommendations on climate transition plans.

Objective 11: Green damage insurance offers

• Encourage the adoption of electric replacement vehicles in the event of a disaster.
• Systematize “green” compensation clauses in automobiles and property insurance.

To learn more about this report and its implications, you can access it here (in French only)