Tribune. The Prudential Control and Resolution Authority (ACPR), which oversees banking and insurance activity in France, published on May 4, 2021 the results of an unprecedented financial year, which aimed to assess the risks associated with climate change by 2050. For a year, nine banking groups and fifteen insurance groups participated in this exercise to determine their resilience to climate change.
In particular, this study announces a significant increase in claims related to the risks of drought, floods and cyclonic storms in overseas territories, with the cost of claims multiplying by 5 to 6 in certain departments. This could result in the withdrawal of insurers from the most exposed geographic areas.
The situation described by the ACPR is all the more worrying given that the figures for 2020 in connection with climatic events are already relatively high. Thus, storm Alex (from September 30 to October 3, 2020), with torrential rains, devastated the Roya valley at a cost estimated at 200 million euros by insurers. The January-August 2020 period was the hottest ever observed in France since the start of meteorological measurements; the financial impact of the drought would amount to more than 500 million euros.
Optimizing risk prevention
To cover this excess of claims, insurers could increase premiums. But with the cost of claims related to climate change promising to be staggering, the increase in premiums would also be. The report mentions an increase of between 130% and 200% over 30 years depending on the category, i.e. an increase in insurance premiums of between 2.8% and 3.7% per year. The question of acceptability by the population could then arise, and shake up the traditional system which sees the insurer as an essential partner in the face of a disaster.
The public authorities must optimize prevention against these risks, even if in-depth work has already been undertaken for several years. For floods, the construction of dikes is an effective solution, as are warning systems that inform the population in advance of the imminent arrival of a disaster. It is necessary to control the development and planning of areas considered to be at risk, in particular in densely populated areas. In the building industry, standards must evolve to obtain better resistance to climatic events. In all cases, strengthening crisis management systems will be a key element.
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