French re/insurers face unprecedented nat cat claims: Fitch

According to Fitch Ratings, French non-life insurers and reinsurers are facing natural disasters on an unprecedented scale this year, exacerbating the pressure on profitability due to claims inflation and the deterioration of the macro-environment. economic.

Analysts assured ratings are not at risk but said the sector’s financial performance is expected to deteriorate significantly in 2022 and 2023.

Fitch notes that losses from frost, storms, drought and wildfires are already expected to make 2022 one of the costliest years on record for French non-life insurers.

The storms that hit several regions of France between May and early July caused total losses estimated at around 3.9 billion euros, according to France Assureurs, and the fires in July and August burned eight times more land than a typical year.

In addition, climatic claims amounted to 4.3 billion euros in January-July 2022, according to France Assureurs, already more than the annual average of 3.5 billion euros over 2017-2021.

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As a result, Fitch estimates that natural catastrophe and weather-related claims are expected to significantly exceed insurers’ annual budgets in 2022, even after reimbursements under France’s natural catastrophe compensation scheme by Caisse Centrale de RĂ©assurance. , the public reinsurer.

This will likely weaken the underwriting profitability of French re/insurers, and this situation could deteriorate further as weather-related claims become more frequent and severe due to climate change.

In the years to come, Fitch therefore expects French insurers to significantly increase premiums for property and agriculture insurance, and reduce their exposure to climate-related risks.

In the short term, however, insurers are unlikely to be able to raise premium rates fast enough to keep pace with rising claims costs, particularly if inflation remains high and the government continues pressure insurers to offer discounts to consumers.

In addition, Fitch notes that French non-life insurers will face higher reserving requirements at least until 2023 due to higher than expected claims inflation. However, Fitch expects increased reserves to dampen earnings rather than deplete capital given the industry’s historically cautious approach to reserve building.

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