Climate-related disasters could raise insurance prices in Europe

It's happening here (France) as well. Insurer have cancelled their contract with some cities because it would be to expansive to do what they are paid for...

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Pyrénées-Orientales : ces communes qui voient leurs contrats d'assurance résiliés face à la hausse du risque

After dealing with floods, landslides, fires... in recent months, the nightmare has taken another turn for some mayors, many of them in the Pyrénées-Orientales region, who are seeing their insurers suddenly withdraw from their contracts. Faced with unbearable increases or outright cancellations from one day to the next, a veritable marathon has begun for the elected representatives of small communes, who are sweating to find a new insurance company.

It's been around two years since the evil began to creep into municipal councils in the département, as it has in many other parts of France. Some elected representatives no longer hide their fear at the thought of opening a letter from their insurance company. End of contract or not, the bad news can come at any time. There are two phenomena," says Edmond Jorda, president of the Catalan branch of the Association des Maires de France. Either a staggering rise in membership fees. Or the insurance company simply pulls out." On the morning of Monday November 6, the elected representative met with the president of the AMF Occitanie on this subject. "On November 22, this will be the theme of a workshop at the Congress of Mayors in Paris," he informs, "the title of which will be 'Does my commune have an insurer?'"

In fact, the scale of the problem is such that on October 25 the government launched a mission on "the insurability of local authorities". It will have the difficult task of determining how to get local authorities, already overwhelmed by the vagaries of the weather, out of the rut.

Unsuccessful call for tenders

A number of communes in the Pyrénées-Orientales region, particularly on the coast and in the Agly and Têt valleys, have recently received notices of increased premiums, or worse. "Some people have had their insurance withdrawn mid-contract", says Edmond Jorda, although he stresses that this is legal. This is how the mayor of his commune of Sainte-Marie currently finds himself without "ordinary sickness" insurance for his municipal employees. "There are many of us in this situation, and our employees are no longer covered by our insurance except for long-term sick leave, long-term illness or maternity leave." Forcing the communes to compensate out of their own funds.

Not far away, in Torreilles, the municipality is under a double sword of Damocles. "Mayor Marc Médina laments, "Our insurer cancelled our property insurance policy before the summer, on the grounds that we are in a flood zone. The problem is that the call for tenders immediately launched by the commune was unsuccessful. "It's not uncommon for companies not even to reply to our letters," says a disappointed Edmond Jorda. "As soon as we're on a risk prevention plan or listed on a natural disaster decree, the insurers either impose prohibitive rates on us, or don't respond to our requests."

In Torreilles, "we will no longer have insurance as of next January", warns Marc Médina. But that's not all: on the same date, the second insurance company covering the commune and its 70 or so agents for supplementary health insurance will also lapse. "We had a firm that insured us. But in July 2022, they announced that they would be cancelling the contract on January 31. We renegotiated a small increase in the deductible and the contract was maintained. A few weeks ago, however, we received a reminder that our contract would be terminated again on December 31, 2023."

200% increase in municipal contribution

The mayor does not understand this decision. In his view, it was sick leave, which was too high for the insurer's liking, that had justified this "readjustment". But since then, he insists, the situation has largely improved. He thought he was safe from another surprise. The only way out for him was a 200% increase in the municipal premium. In other words, the contract would rise from €47,000 to €147,000 for the commune of 3,800 inhabitants.

"We can't afford not to have insurance," insists Marc Médina, who has called in a specialist consultant to find an insurer willing to take on his commune. Because "it will be impossible for the commune, in the event of a glitch, to take on the financial risk." "If, for example, a man were to injure himself while jogging on a road and need care for years, the taxpayers would have to pay ad vitam aeternam," adds his neighbor from Sainte-Marie. "But it's the insurer's job to take risks," points out the mayor of Torreilles.

The two councillors then turned their attention to the State: "We should set up a fund to protect local authorities," suggested Marc Médina. In essence, this is what Edmond Jorda intends to demand, arguing: "The State must at least provide an offer.

"Reinsurers see risks multiplying and passing them on to insurance companies".

SMACL, an insurance company specializing in local authorities, refers to a domino effect almost "beyond its control". Its press office, contacted on Monday, confirms that local authorities all over France are increasingly receiving "notices of payment due in the course of the year". The explanation for this phenomenon? "We take into account the sinister nature of the situation at national level. And it so happens that, whereas 5 or 10 years ago, the risks of natural phenomena occurring were one-off or rare, today they are becoming 'systemic'. The recurrence of such events is increasingly costly to indemnify, and the very large sums involved mean that insurers are obliged to reinsure with very large multinationals, often abroad." The bill includes the weather, of course, but also riots, which are on the increase, and their attendant material damage.

All this is mutualized and passed on. In the end, explains SMACL, "insurers have no choice but to tighten up their conditions, either by reviewing ceilings or increasing deductibles."

Here too, the company has initiated discussions with the government. The aim: "to make the regulations evolve." To put it plainly: "Perhaps the State could play a greater role in this type of situation, so that elected representatives are not left without a solution. Because," SMACL points out lucidly, "claims are not going to stop tomorrow.

"Insurers are becoming more and more cautious, so we have to negotiate by mutual agreement".

A former insurance agent in Perpignan, Dominique Boisserie is a consultant in public procurement and insurance for local authorities. Some forty communes in the Pyrénées-Orientales region have called on his services over the past two years, including Torreilles, for whom he is currently seeking a new insurance policy. His asset, says the professional, is the Groupement d'Intérêt Economique to which he belongs, which gives him a certain credibility in his dealings. "Over the past few years, a number of natural disasters have had a major impact on certain towns on the Catalan coast or near the Agly or Têt rivers. But they are also paying for the riots in other French towns. All our customers are feeling the pinch. And insurers are becoming increasingly cautious."

He explains that SMACL has had financial difficulties and recently merged with MAIF, which withdrew from the market, driving down the offer. Another insurance group with a strong presence in the local authority market, according to the specialist, has become "extremely selective about the risks it underwrites, and in particular has decided to take on far fewer local authorities." His solution today is to negotiate by mutual agreement. Discussions are tough, but at the price of higher deductibles in particular, they have a chance of succeeding.

Translated with www.DeepL.com/Translator (free version)

In my country (France) it's mandatory to have one...