Title: Insuring the uninsurable The French Natural Catastrophe System
1Insuring the uninsurableThe French Natural
Catastrophe System
Paris 1910 - French Parlement
2- What perils menace France ?
- Windstorms and hurricanes
- Lothar Martin (1999) EUR 7-8 Billion
- Cyclone Hugo (1989) EUR 700-750 Million
- Floods
- Centennial flood in the Paris area (IIBRBS
estimate) - EUR 3.2 billion for direct damages
- EUR 1.5 billion for indirect damages
- 200 towns
- 250 000 persons
3- What perils menace France ?
- Landslides (including subsidence)
- At least EUR 2.6 billion since 1989
- Earthquake
- EUR 61 million for the small Annecy earthquake
- The Big One a major earthquake in south of
France would cause very important damage - Avalanches
4- Insurability of natural perils
- France has split natural perils in two categories
- Perils considered as insurable
- windstorms/hurricanes
- hail
- snow pressure
- freeze
- Perils considered as uninsurable
- all others (floods, earthquake, landslides,
avalanchesetc). - The border between these two categories is not
fixed.
5- Public funds
- State systems
- Financed by taxes
- National Fund for Agricultural Disasters - 1964
Law - A mixed scheme
- State and Re/insurance industry
- Certain conditions fixed by the State
- Solidarity
- Natural Catastrophe Scheme - 1982 Law
6 non insurable direct material damage arising
solely as a result of a natural element of
abnormal intensity, when normal preventive
measures have not been respected The damaged
property must be covered by a property damage
insurance policy
7- Main characteristics of the
- Natural catastrophe insurance
- Solidarity obligatory extended guarantee on
fire policy (direct damage and/or business
interruption) - Security guarantees replacement value of
insured property, no time depreciation - Factors fixed by the State
- declaration of the state of natural catastrophe,
- definition of the perils,
- deductibles,
- rating.
8Declaration of an Eventby inter-ministerial
decree
Compensation
Decree
Inter-Ministerial Commission
Prefecture
Prefecture
Mayor
Mayor
9- Inter-ministerial Commission
- Distribution of accepted files by type or peril
- (from 1982 to June 2002)
10Deductibles and Rating
- Deductibles fixed by the State and cannot be
bought back - Rating percentage of damage guarantees of the
basic policy (or, failing this, 0,50 of the
damage premium).
11- Risk Prevention Plans (PPR) mapping of the
risk used to develop durable urban planning (land
use and construction codes) - 13,000 towns have a PPR
- Deductibles multiplicative factor applied to
towns without a PPR where events are frequent - 1 or 2 decrees basic deductible
- 3 decrees doubled deductible
- 4 decrees tripled deductible
- 5 or more decrees quadrupled deductible
12Market Premiums and losses Non Auto (data
source ceding company accounts as at May 2002)
M EUR
13- CCR is able to offer the market a reinsurance
scheme with unlimited cover, backed by the State
guarantee a guarantee of solvency. - CCRs duty increase the responsibility of
those involved in the scheme, to insure the
continuity and the viability of the system. - CCR and prevention develop an effective
prevention policy
14Evolution of cessions to CCR(loss occurring
basis - millions of Euros)
() Estimates
15Evolution of CCRs equalization
reserve (Accounting years - millions Euros)
16- The French System is it ideal ?
- The 1982 law has shown to be adapted to the
situation in France. However, France benefits
from - Moderate exposure to natural risks
- A well developed insurance sector
- While it is not adapted to every situation, the
French system can be used as a reference. Each
market can find its own answer to financing
natural risks depending on its exposure to
perils, insurance market, culture and history.
17For further documentation on the French Natural
Catastrophe Schemehttp//www.ccr.fr