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Study on the consequences of climate change on the cost of natural catastrophes in France up to 2050.

10/17/2023

Established more than 40 years ago, the natural catastrophe (Nat Cat) compensation scheme has successfully achieved the targets set by French legislators in 1982. These goals include ensuring widespread insurance coverage at a sustainable cost, delivering suitable compensation to individuals and businesses impacted by perils, facilitating a swift return to normalcy, and fortifying the resilience of the French population and economy. 

In addition to compensating claims, the Nat Cat scheme has improved knowledge of these risks, which were relatively poorly understood in 1982, and has made a major contribution to funding prevention. 

Although the scheme has performed effectively thus far, it is now grappling with the challenges posed by climate change. Consecutive years have witnessed  elevated claims attributed to geotechnical drought, providing a glimpse into the anticipated claims experience over the medium term. 

Climate change is overturning traditional actuarial approaches, with the use of the historical claims experience and even complex physical modelling reaching their limits due to the changing and non-stationary nature of the climate. In order to gain a better understanding of the upheavals ahead, CCR has been working for several years with its scientific partners, first and foremost Météo-France, on an ambitious project tomodel and forecast the consequences of climate change in terms of insured losses under the Nat Cat scheme. 

Building upon previous studies released in 2015, 2018, and 2020, this latest research leverages recent advancements in damage modelling. It also considers the impact of recent and ongoing reforms to the scheme. The results of the study will be used to feed discussions on the need to adapt the Nat Cat scheme to the rising claims rate in the wake of climate change, with a view to ensuring its long-term survival. They may also be used to guide public prevention policies in order to contain the rise in losses. 

CCR anticipates a 40% rise in claims experience by 2050 due to the effects of climate change. When factoring in alterations to insured stakes, this estimate increases to 60%. The drift already observed in the claims experience and the projections for 2050 shows the need to review how the scheme is financed by adjusting the Nat Cat additional premium to enable the scheme to return to technical equilibrium and for CCR to fully play its role as a shock absorber. The necessary increase is estimated at +7pp in the short term, followed by a further 3pp increase to take account of future climate change between now and 2050.

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Find the 6 key points (in french) of this study by clicking here: L'Essentiel by CCR - Climate Study 2023

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