France

In this chapter of our Annual Insurance Review 2022, we look at the main developments in 2021 and expected issues in 2022 for France.

Key developments in 2021: continuation… 

 Last year, we mentioned a decision rendered on 24 September 2020 by Cour de cassation (French Supreme Court) regarding aggregation of claims in PI insurance, in case of breach of the duty to inform and advise committed by an insured toward many clients. Cour de cassation decided that “provisions of article L.124-1-1 of French Insurance Code confirming claims aggregation are not applicable to liability incurred by a professional in case of breach of the duties to inform and to advise, these duties being individualised by nature and excluding that there is a technical cause, under article L.124-1-1, allowing to deem them a unique damaging event”. 

This position is open to criticism but Cour de cassation nevertheless reaffirmed it on 26 November 2020 and then on 27 May 2021. The ten identical decisions rendered on 27 May 2021 are all the more noticeable that in order to quash the decision of the lower court, Cour de cassation raised of its own motion the issue of aggregation which was not in the grounds of the final appeal. 

We also mentioned last year that the issue of coverage of operating losses when there is no physical damage, which was already an issue the year before, has been renewed and rendered more accurate than ever by the Covid-19 pandemic. 

The question of coverage of operating losses sustained by professionals following the lockdown received various answers and the decisions rendered by various courts (of first instance and of appeal) in France leave an impression of chaos. 

Considering this, some insurers, among which a prominent French insurer, initiated last summer a process of amicable settlement which met quite a success (the offer has been accepted in 80% of the matters). 

Still, the issue of capacity on the insurance market for this kind of risk remains, which poses the question of sharing the risk between insurers and the State. Some consider the solution could be a mix including compulsory insurance and an "exceptional disaster" guarantee fund, similar to the “natural disaster” fund. 

What to look out for in 2022: insurance and reinsurance facing climate change

In France too, climate change has become a major concern regarding insurance. 

Regarding first party insurance, multiplication of natural disasters and increase of the amount of losses question sustainability of the current system of insurance and State guarantee fund. An Act is currently discussed before French Parliament, but it is not as ambitious as one may have expected. 

Regarding third party insurance, presently the risk appears quite difficult to apprehend through civil liability. Insurers are still trying to figure out how climate change may give rise to a civil liability involving insurance, insofar as classical conditions are usually not met. But rules might be bent as they have been in order to compensate environmental harm. It is also possible that climate change litigation is based upon classical grounds of liability that are not strictly related to climate change, like tort liability, liability arising from environmental damage, D&O...  

Written by Romain Schulz.

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