France

In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for France.

Key developments in 2022: 

COVID-19 Pandemic

We mentioned in last year's review the issue of coverage of operating losses when there is no physical damage, in the context of 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 on appeal) in France left an impression of chaos. 

Litigation is now maturing. A general trend is that courts of appeal are less favourable to the insured than courts of first instance. They are more prone to admit validity and then application of the exclusion aiming pandemic. 

Cour de cassation (French Supreme Court) rendered on 1st December 2022 four identical decisions finding that the exclusion regarding pandemic is valid. In each of these four matters the decision rendered by the court of appeal of Aix-en-Provence is quashed and the case is to be ruled again by the same court (composed by other magistrates). 

As to the impact of this case law, we may remind that ACPR (French authority supervising insurance) conducted an audit of damage insurance contracts available in France and as at June 2020, the result was that 93% of the contracts expressly excluded an event as exceptional as the pandemic. The wording may of course differ from a contract to another, but Cour de cassation provided clear guidelines. 

We may however expect that some insured do not admit the position expressed by Cour de cassation and that some lower courts resist. 

A large number of matters have been settled out of court, but litigation remains, and is going nowhere in the near future.

Remote sale of insurance contracts

ACPR (Autorité de Contrôle Prudentiel et de Résolution: French authority supervising insurance) pursues its surveillance of remote sale of insurance contracts, especially through telephone. 

The Sanction Commission of ACPR rendered on 17th October 2022 a decision sentencing an insurance broker. This decision calls few remarks. 

The first remark is that the broker had previously been sentenced on 28th February 2020, under a different name but for the same breach of duty. Still, ACPR shows strict vigilance, and it is obvious that this responds to a policy of protection of consumers. 

The second remark is that the broker operated through a call centre established out of the European Union. This is not illegal in itself but requires that the broker operates a control through its employees based there. 

What to look out for in 2023: 

Insurance and new technology

NFTs (non-fungible tokens) have rapidly met insurance. As any valuable artwork, they can be subject to insurance. Regarding property insurance, an interesting question is to determine whether the damage guaranteed is material or immaterial. NFTs can also involve other types of insurance. High volatility of prices can lead to suspect price manipulation and then claims involving fraud insurance or PI insurance. 

Parametric insurance

Parametric insurance is not exactly a new trend: it has existed for several years but remains limited in France. Its development is still to come. As there is no specific regulation, such contracts should be subject to insurance law when they are deemed insurance, or alternatively to common contract law. 

This poses questions insofar as even when parametric insurance is presented as a simplified insurance, it remains insurance and simplification cannot lead to the rules of insurance law being overlooked. 

Parametric insurance most often covers meteorological hazard. It is then likely that there is multiple insurance policies active when parametric insurance covers natural disasters, which are subject to a compulsory coverage in property insurance contracts. The issue is all the more complex that some properties and some types of damage are not subject to the compulsory coverage of natural disasters and to this extent, the parametric insurance remains relevant. 

The most serious issue regarding parametric insurance is the principle according to which the indemnity paid under insurance cannot exceed the damage actually sustained by the insured (article L. 121-1 of French Insurance Code). There is then a risk that the lump sum granted through parametric insurance exceeds the actual damage. In order to prevent this, it is often stipulated that the amount of indemnity is the lower of the following: either the lump sum or the damage actually sustained. This implies that a loss is declared and instructed in a classic and well-known fashion, but the wished simplification is then limited.  

Written by Romain Schulz.

Download our full Annual Insurance Review 2023 for more insights.