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The French government is currently working on the creation of a reinsurance fund to compensate for losses caused by riots.
Inspired by the natural disaster insurance scheme, the new mechanism would make riot risk coverage mandatory for insurers and would be backed by a government guarantee.
The fund would provide coverage from the first euro of damage, up to a maximum of 775 million EUR (909.5 million USD) per year. However, its intervention would depend on each insurer’s market share and the severity of the losses.
The financial burden would be distributed based on a key indicator, the loss ratio (L/P):
- L/P < 90%: 20% covered by the fund, 80% by insurers
- L/P between 90% and 180%: 80% covered by the fund, 20% by insurers
Beyond this threshold, insurers would continue to seek reinsurance from private providers and could also rely on the Caisse Centrale de Réassurance (CCR), which benefits from an unlimited government guarantee.
To finance the fund, the government plans to introduce an average 5% additional premium on all property damage insurance contracts.
