Recent street riots across France will show how well current insurance coverage holds up, just months before a new state-backed system takes effect, according to DBRS Morningstar analysts Marcos Alvarez and Elisabeth Rudman. In a note published Tuesday, they said the riots reinforce a trend identified in 2023: riots and civil commotion increasingly resemble catastrophe risks. The new regime, once implemented, "should reduce uncertainty surrounding the allocation of extreme riot losses," while insurers remain reliant on private insurance, reinsurance and potentially contentious state recourse until then.
Protests drew more than half a million people across France on Saturday, but some turned violent with looting. Interior Ministry figures released late Sunday showed 2,397 people were arrested that day. The unrest has since calmed down. The country was last hit by violent demonstrations a little over three years ago, prompting the government to reform riot insurance.
The new framework includes mandatory riot coverage within relevant property insurance contracts, along with a mutualisation mechanism backed by the French State and managed through the CCR. It lets insurers transfer a substantial share of qualifying riot losses, giving the market a public backstop for potentially systemic events. The analysts said the main concern for insurers is the aggregation of thousands of correlated claims across commercial property, motor, government property and business interruption portfolios when unrest spreads quickly across cities.
The analysts estimated insured losses from the latest turmoil at below €1.2 billion ($1.3 billion). That would be a meaningful earnings hit for the French property and casualty sector but is unlikely to cause a capital event or materially affect the credit profiles of major insurers. Finance Minister Roland Lescure met insurers, business federations and banks this week and announced support measures for affected businesses, while Axa SA and BPCE Assurances extended claim reporting deadlines to 30 days from the usual 5.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing