France

In this chapter of our Annual Insurance Review 2024, we look at the main developments in 2023 and expected issues in 2024 for France.

Key developments in 2023

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, and the fact that litigation before various courts of first instance and of appeal in France left an impression of chaos. 

Cour de cassation (French Supreme Court) rendered in 2023 other decisions in order to provide guidelines. It is not a surprise that decisions are still rendered: litigation involves various insurance contracts, with different wordings and different exclusion clauses. Besides, Cour de cassation also had to remind more general rules. 

A decision rendered on 12th October 2023 concerns validity of an exclusion regarding operating losses in the context of a pandemic. But the issue raised before Cour de cassation is broader than the wording of the clause: it is about the legal basis of analysis. The lower court decided that the exclusion at stake was valid in contemplation of provisions of article L. 113 1 of French Insurance Code (setting specific conditions of validity for an exclusion regarding the drafting of the scope) but declared it invalid with regard to provisions of article 1131 of French Civil Code (regarding illicit cause of a contractual obligation). The decision is quashed because validity of an exclusion must be appreciated with regard to specific provisions of French Insurance Code. 

A decision rendered on 9th November 2023 is more tightly bound to the wording of the policy. The lower court ruled that the contract covers operating losses which are not consequential to physical damage sustained by the insured’s property, subject to the contractual limit. The final appeal before Cour de cassation is dismissed because the lower court sovereignly construed the terms of the policy without distorting them. 

We mentioned last year that ACPR (Autorité de Contrôle Prudentiel et de Résolution: French authority supervising insurance) pursued in 2022 its surveillance of remote sale of insurance contracts, especially through telephone. 

In 2023, ACPR also pursued its surveillance of protection of data and enforcement by Insurers of measures against money laundering and terrorism financing, which was presented as one of its priorities for the year 2023. 

ACPR rendered on 12th October 2023 and 13th November 2023 two decisions sentencing two insurance companies for breach of the duties regarding money laundering and terrorism financing. These decisions are not isolated: since 2011, more than half of decisions of sanctions are rendered by ACPR in this area (mainly against credit establishments, but insurers are also concerned). 

The decision dated 13th November 2023 is rendered in the field of sanctions: the insurance company has infringed regulation regarding freezing of assets (especially detection of persons subject to such measure). 

What to look out for in 2024

Prices and emerging risks

Following a general trend of inflation, prices of Insurance increase in 2024, mainly due to the aggravated burden of losses. This has been echoed in media (not only those specialised in insurance) at the end of 2023. 

The increase of losses arising from climatic events has of course been pointed out. In north of France some insured have been affected by floods successively in the autumn 2023 and at the beginning of 2024. We may expect in summer 2024 damages caused by drought (in agriculture as well as damage to buildings due to move of the desiccated soil). 

Costs of repairs are also a factor in the increase of premiums. Even when frequency of losses and the extent of damage do not really aggravate, repercussion of prices of raw materials and of energy increase the costs (e.g. construction or motor insurance)

This leads to the notion of emerging risks, which is discussed by certain persons in France. 

It is indeed questionable that climatic risks or war risks are “emerging”. Though the events are unmistakably developing, they are not really new and sometimes they are not insurable risks. For instance, climatic risk is in itself not insurable, not only because it is beyond capacity of insurance, but also because the climatic change has become certain if it has not occurred yet. The climatic factor remains however the cause of aggravation of insurable risks (events like tempests, floods or drying of soils). 

One could consider the only emerging risks are new technological risks. A well-accepted example is cyber risk. Other risks, currently undermined, are those related to nanotechnology and to biotechnology. 


Written by

Gérard Honig
Managing Partner
+33 1 53 57 50 37
ghonig@hmn-partners.com

Sarah Xerri-Hanote
Partner
+33 1 53 57 50 20
sxerri-hanote@hmn-partners.com

Romain Schulz
Of Counsel
+33 1 53 57 50 22
rschulz@hmn-partners.com