After every major storm, some local elected officials call for the publication of an official natural disaster declaration. Is there any merit to this request?

Storm, Hail and Snow Coverage

In mainland France, storm damage is covered by property insurance policies under the Storm, Hail and Snow (TGN) guarantee, which applies without the need for a ministerial order. Since the law of 25 June 1990, any insurance policy covering fire damage to property must also cover the effects of winds caused by storms, hurricanes and cyclones. The “Storm, Hail and Snow” (TGN) guarantee is therefore included in all comprehensive home insurance policies.

The natural disaster compensation scheme, by contrast, covers hazards that are not insurable under the TGN guarantee, such as flooding, mudslides and drought. It requires an official declaration recognizing the natural disaster and is subject to its own statutory excess.

A brief history*

In 1960, following exceptional flooding in eight French departments, Parliament passed for the first time a law providing state compensation for damage caused by such extreme weather events.

Between 1977 and 1980, a succession of floods in southern France reignited the debate over solidarity in the face of natural disasters. This led to the submission of five legislative proposals to establish a national natural disaster compensation scheme.

Established by the law of 13 July 1982, this scheme was designed to support the private insurance market by covering damages caused by natural disasters. It is based on a public-private partnership between insurers and the state, allowing insurers to draw on the state guarantee when claims exceed a certain threshold.

Which natural hazards are covered by this scheme?

• Flooding and mudslides (river overflow, surface runoff and groundwater rise)
• Drought episodes and the shrink-swell phenomenon affecting clay soils (RGA)
• Ground movements (landslides, subsidence and rockfalls)
• Avalanches
• Earthquakes and volcanic eruptions
• Cyclonic winds (winds with an average speed exceeding 145 km/h over 10 minutes, or instantaneous gusts exceeding 215 km/h)
• Coastal flooding and the direct action of the sea.

Consequently, in most French overseas departments, territories and collectivities — with the exception of French Polynesia and New Caledonia — the natural disaster compensation scheme applies to cyclonic winds exceeding Category 3.

What difference does this make for policyholders?

First, the statutory excess applied under the natural disaster compensation scheme (€380 for flooding, storms or earthquakes in France's overseas territories) is generally higher than the excess stipulated in comprehensive home insurance policies, which varies from one policy to another.

Second, the publication of an interministerial order officially recognizing a state of natural disaster takes time — theoretically two months, but sometimes longer. By contrast, insurers can register and process a storm damage claim immediately after the event.

From a policyholder's perspective, it is difficult to see what advantages would be gained by bringing high winds within the natural disaster compensation scheme in mainland France.

Why, then, should this particular risk — which is already very well covered — be incorporated into the natural disaster scheme, potentially placing an even greater burden on a system already under considerable strain from increasingly frequent and severe droughts and the growing incidence of clay soil shrink-swell (RGA)?

*Source: CCR (Caisse Centrale de Réassurance — France's Central Reinsurance Fund).