A report from the French Federation of Insurance Companies, and an analysis of the French non-life sector from Standard & Poor’s both show that lingering problems from last year’s devastating windstorms, and new worries about climate change, are adversely affecting the industry.
French insurance companies have already paid over 3 million claims from the storms, totaling almost 45 billion francs ($6 billion), and still have a few more to settle.
In addition industry analysts have warned that more violent weather events can be anticipated due to climate changes. While the winter so far has been the mildest on record, it has also produced severe flooding in England and France. Several towns in Brittany are still under water from the latest heavy rainfall.
Reacting to the trend, S&P issued a report which establishes “a negative outlook for the French non-life insurance market.” “The French property-casualty insurance market in general looks weaker than the European average,” stated Yann Le Pallec of S&P’s Paris office. “This is largely because of the damage caused by the windstorms “Lothar” and “Martin” in December 1999, but even before that the market was not particularly attractive given its high level of competition.”
Le Pallec sees mergers, consolidations and higher premiums as the inevitable result, with particular growth in the “bancassurance” sector due to its lower cost structure. Bancassurers already control 60 percent of the French life market, he noted.
Premiums have already increased substantially, and reinsurance rates are expected to more than double when renewals are made in January. Industry officials have urged the French government to allow them to increase reserves for exceptional risks, which have been exhausted by the high number of windstorm and flood claims.
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