Economic impact of recent riots estimated

The economic damage caused by the riots on October 17 and 18 has already resulted in a significant financial burden for businesses, with initial estimates suggesting losses covered by insurers could reach up to 1.2 billion euros, according to analyses from the rating agency Morningstar DBRS. The damage includes 3,000 stores across the country that were damaged, according to a provisional estimate by Minister of Commerce Serge Papin.

Losses exceed previous incidents

The damage from the October 17 and 18 riots exceeds that of other recent episodes of urban violence. The summer 2023 riots following the death of Nahel resulted in 730 million euros in insured losses, according to France Assureurs. The Yellow Vest movement in 2018-2019 resulted in 220 million euros in insured losses, while the November 2005 riots caused about 200 million euros in insured losses.

Riots compared to natural disasters

The analyst Marcos Alvarez of Morningstar described the riots as becoming "like natural disasters" in France, with each event costing hundreds of millions of euros in damage annually. Thomas Buberl, CEO of Axa, warned that if the violence continued, insurers would no longer be able to protect businesses. Morningstar DBRS mentioned a "significant loss of results" for the insurance sector but no immediate solvency crisis.

Estimates remain preliminary

The estimates are still preliminary. The severity of individual commercial property damage and the extent of claims for loss of income will determine the final amount, according to Morningstar DBRS. The loss of revenue could be felt by many merchants whose businesses have stopped due to damage or preventive closures. In insurance contracts, compensation for partial or total closure depends on optional guarantees.

Security and tourism affected

The margins of merchants may also be affected by the reinforcement of security measures. The prefect of police in Paris has invited merchants in the city to use private agents. The tourism sector will also face a reduced turnover due to the departure of some tourists, similar to what was observed during the Yellow Vest crisis. Franck Delveau, president of the Union of Trades and Industries of the Hotel Industry in Île-de-France, warned of cancellations of up to 10 percent in Paris hotels.

Public finances and debt implications

The cost will also be felt in public finances through damaged public buildings or infrastructure, reduced activity, or announced support measures. The government has announced a support fund for businesses with fewer than 50 employees or partial unemployment. At the insurance level, the question of the amount recoverable from the state will also arise. The effect will likely be heaviest on the French debt market. Combined with stalled discussions in the National Assembly on the finance bill and the social security financing bill, the images of recent days may have further damaged France's reputation among its lenders. The 10-year rate has risen from 4.80 to over 5.10 percent since last week, representing a projected additional cost of one billion euros in interest next year.