Morningstar DBRS estimates total insured losses could exceed €3 billion after Storm Niels caused widespread damage in southwestern France.
Storm Niles brought heavy rainfall, strong winds and severe flooding in recent days, killing at least two people and injuring dozens more, the company said in a new report.
Saturated soil and overflowing rivers reportedly exacerbated the damage, affecting several areas.
Morningstar DBRS quoted the Cotality Hazard headquarters command center as saying that preliminary insured losses related to wind damage alone were estimated at between 800 million and 1.2 billion euros.
These figures do not include losses from flooding and other disasters, meaning total insured losses could more than double once losses to vehicles, property and business operations are fully accounted for.
With this in mind, Morningstar DBRS explains that total insured losses are likely to exceed €3 billion.
The company continued that in France, natural disaster losses are covered by the NatCat (Natural Catastrophes) insurance system, a nationwide public-private framework that provides automatic catastrophe insurance through all property insurance contracts.
“France’s NatCat insurance scheme is a state-backed public-private mechanism designed to ensure nationwide protection against natural disasters by incorporating mandatory catastrophe insurance into all property insurance contracts. The system, established in 1982, requires insurers to include NatCat insurance by default and is funded through premium surcharges,” Morningstar DBRS said.
The company said the mechanism ensures broad and affordable protection against events such as floods, droughts, earthquakes and landslides, while protecting private insurers from the financial burden of large catastrophic events.
As we have reported extensively, insured losses from severe weather events have increased significantly over the past decade as climate-related events have become more frequent and severe.
In response, the French government is increasing NatCat surcharges from 12% to 20% for property policies and from 6% to 9% for car insurance from January 1, 2025, to strengthen the financial sustainability of the scheme amid escalating climate pressures.
Morningstar DBRS concluded: “While this adjustment will ultimately increase costs for policyholders, France’s NatCat reinsurance program remains one of the most comprehensive natural catastrophe insurance frameworks in Europe.
“Its structure underpins the financial stability of the private insurance sector by providing necessary loss absorption capacity and protecting insurers from the financial impact of large-scale catastrophic events.”
