Cat Nat System: Major Reform Ahead
The natural disaster compensation system provides indemnification for victims of unusually intense natural events that are not covered by standard insurance policies. It specifically includes floods, earthquakes, cyclones, and the risk of soil shrinkage and swelling (RGA). However, it does not cover fires, storms, hail, or snow, as these risks are already covered by the guarantees of standard insurance contracts.
What are the challenges and impacts on your coverage?
In the face of climate change and the increasing frequency of extreme weather events, this system, which has so far demonstrated its resilience, is now stretched to its limits.
Since the creation of this system, total payouts have reached €50 billion, compared to €43.9 billion in contributions collected.
All the projections tend towards an increase in the loss rate of approximately + 40% by 2050 under the effect of climate change and even +60% by integrating the evolution of insured issues (CCR - Central Reinsurance Fund).
The Central Reinsurance Fund evokes a possible deficit "of at least 420 million euros per year by 2050". It had therefore become necessary to guarantee the solvency of this scheme without drastically reducing its coverage.
This is the reason why the public authorities have announced a significant evolution of financial resources as of January 1, 2025.
Thus, the prime rate specifically financing the "Cat. Nat." will increase from 12% currently to 20% of the insurance premium for Property damage insurance contracts for private, professional and business contracts; from 6% to 9% for Theft and Fire guarantees for car insurance contracts and from 0.50% to 0.75% for the Glass Breakage guarantee if no other damage guarantee is taken out on car insurance contracts.
| 2024 | 2025 | |
|---|---|---|
| Motor vehicle insurance Premium rate for Theft – Fire (not combined with the Glass Breakage premium rate) | 6 % | 9 % |
| Motor vehicle insurance Premium rate for Glass Breakage (if no property cover has been taken out) | 0.50 % | 0.75 % |
| Fire and miscellaneous Risks Individuals – Professionals – Companies – Buildings - Agriculural Premium rate applicable to all property cover | 12 % | 20 % |
The impact on the total insurance premium is therefore not necessarily strictly correlated since the rate applies to certain guarantees; however, it may be close to it.
Illustration under a "Property Policy" with a total insured value of 50 Million Euro:
| 2024 | 2025 | |
|---|---|---|
| Premium before tax | 10 000 € | 10 000 € |
| Additional Premium « Natural Disaster » | 12 % = 1 200 € | 20 % = 2 000 € |
| Additional Premium « Terrorist attacks » | 21 % = 2 100 € | 21 % = 2 100 € |
| Insurance taxes* | 8 % = 1 064 € | 8 % = 1 128 € |
| Premium VAT | 14 364 € | 15 228 € |
| Increase | 6,02 % |
It should be noted, at the same time, that the compensation system for natural disasters has recently undergone adjustments in order to better protect the insured and to relax the rules for compensation.
For exemple :
- The taking into account of new compensation items (emergency relocation costs for the main house, architect and project management costs, when they are mandatory)
- The modification in terms of transparency, declaration and processing deadlines with extended deadlines to allow more compensation and reviewed for faster compensation
- The new deductibles applicable on January 1, 2024
Our experts are at your service to help you understand these changes and their impact on your insurance contracts. With our expertise, we assist you in anticipating and adapting your coverage with complete peace of mind.
Feel free to contact us for personalized advice and tailored support.
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