Climate risk impacts insurance markets

Climate risk is increasingly affecting insurance markets globally, with rising costs for households and businesses due to natural disasters, heavier deductibles, and more exclusions. In 2025, natural disasters cost insurers 107 billion dollars worldwide, according to Swiss Re.

Secondary perils drive losses

These losses are primarily from "secondary" perils such as thunderstorms, hail, floods, and fires, which have become frequent and diffuse, affecting warehouses, factories, and stores. Globally, the increase in insured losses is mainly due to the multiplication of goods built in exposed areas and the rising cost of their reconstruction.

France faces rising disaster claims

In France, climate change itself is expected to increase natural disaster claims by about 40% by 2050, and 60% when considering the increase in exposed assets. The El Niño episode expected by the end of 2026 and the beginning of 2027 could exacerbate drought, flooding, and extreme heat risks in tropical regions.

French disaster insurance costs double

In France, the public regime for natural disasters, called CatNat, saw the cost of its claims rise from about 1 billion euros per year on average since 1982 to nearly 2 billion today. The Central Reinsurance Fund predicts that climate change alone will increase these claims by about 40% by 2050.

Insurance system lacks prevention incentives

The worsening of claims is unlikely to slow down, as several recent studies conclude that global warming is accelerating. The 1982 law created a hybrid system of private insurance and national solidarity, with a mandatory guarantee for natural disasters, a surcharge fixed by the State, and a public reinsurance fund backed by the State. However, the current system has weak incentives for prevention, as the surcharge does not vary based on individual or communal risk management efforts.

Insurance availability declines in France

In 2026, the Observatoire de l'assurabilité reported that 811 communes in metropolitan France are experiencing tightening insurance offers, and all overseas territories studied are under tension. In California, the first home insurer ceased to accept new contracts in 2023, citing increasing exposure to disasters.

Government measures fall short

The government announced measures in June 2026, including reviewing the surcharge rate every five years, helping insurers remain present in exposed areas, and launching a mission on insurance in overseas territories. However, these measures do not address the logic of deductibles or create individual incentives for prevention.

Proposals aim to modernize insurance

To modernize the insurance system, proposals suggest maintaining national mutualization while modulating deductibles according to prevention efforts. This would involve financing collective prevention efforts, reducing deductibles for sites that implement priority measures, and channeling part of the surcharge towards prevention through the Barnier Fund.

Reform seeks to balance solidarity and incentives

The reform aims to avoid mutualization without incentive and strictly individual risk pricing, which could place the cost of exposure on households and companies that have not chosen their location or lack the means to protect themselves. The challenge is to ensure that the modulation does not become a means of returning to individual risk pricing, which would undermine the solidarity protected by the 1982 regime.