French towns left uninsured as climate change increases risks

Some 2,000 towns and cities across France found themselves uninsured at the start of the year after insurance companies raised rates or ended contracts in line with the cost of covering damages brought by storms and flooding. Climate change is forcing a rethinking of the entire insurance industry.

A street in Neuville-sous-Montreuil, northern France, that was completely flooded in November 2023. Many towns that were hit with flooding and storm damage have found their insurance contracts cancelled at the start of 2024. © Denis Charlet/AFP

On 31 December 2023, the mayor of Dinan was informed by the company that insured his town that it would not renew its contract.

A town of 15,000 in Brittany, it was hit by storm Ciaran in November that caused €1.3 billion in damages across western France.

Without insurance for its public buildings, vehicles and schools, Dinan had to scramble. A Japanese company was willing to insure some of the town’s property, but only for January.

The rest is the town’s responsibility.

Mayor Didier Lechien gives the example of fire in 2019 that caused five million euros of damage.

“For a town of 15,000 residents that is not very rich, if we need to face such an expense, the budget is gutted,” he told RFI.

Dinan is one of several French towns that were dropped by their insurance companies at the start of this year – between 1,000 to 2,000, according to the Association of French mayors.

Self-insurance

Many others have seen the price of their insurance policies go up by up to 70 percent.

Sables-d'Olonne, a beach town on the Atlantic coast of Western France, which suffered €300,000 of flood damage from a storm in August 2023, found itself uninsured.

“Repeated climate hazards and urban riots have made insurance companies spend large amounts,” the town’s vice president, Jean-Pierre Chapalain, who is a former insurance agent told the Ouest-France newspaper.

The town must now “self insure”, which he says involves “taking on the costs that could result from a natural disaster and taking responsibility for damages that, until now, were covered by the insurance company”.

This must be a temporary solution, he insists, as it will quickly empty city coffers.

Climate change impacts on the rise

A study by the Covéa insurance group estimated an increase of 60 percent in the cost of covering natural disasters by 2050, linked to the severity of flooding, drought and hail.

Taking the most pessimistic projections, in which carbon emissions are not regulated and global temperatures rise five degrees Celsius by the end of the century, the report anticipates a 130 percent increase in costs linked to flooding in France by 2050.

The Smacl, one of the two main companies insuring cities, has said it will have to increase rates and change contracts because of increased risks.

Its finances were fragilised by the riots in and around Paris in June and July 2023 when it paid out €65 million in damages.

Insurance companies “anticipate an continuous increase of climate risks and societal problems,” mayor of Vesoul, Alain Cretien, told RFI.

Spreading the risk

He has been tasked by the government, along with Jean-Yves Dagès, former president of the Groupama insurance federation – the other large group insuring towns – to produce a report on the future of insuring French towns.

Some players have proposed a three-tiered system, with towns taking charge of smaller disasters, insurance companies intervening for standard damages, and the state stepping in to cover climate events.

Other ideas include basing insurance premiums on resources, with richer paying more than poorer ones, in order to spread the risk.