6 FINANCIAL ATTRIBUTES UNDER THE NAT/CAT, THE FRENCH GOVERNMENT P...

4.6  Financial  Attributes  

Under the NAT/CAT, the French government provides a sovereign guarantee to underwrite the regime.

This means that if in a given year claims and payouts exceed the schemes reserves the NAT/CAT is

supported by an unlimited state guarantee. In addition to the state guarantee, unlimited catastrophe

coverage is available from a publicly backed reinsurance provider called the CCR (Caisse Centrale de

The French state retains overall financial control of the NAT/CAT. It is responsible for setting how much

policyholders have to pay to be covered through the Central Tariffs Office. The NAT/CAT appears to be

a secure compensation system as the state guarantee offers protection to its citizens by making sure

full compensation is received. It also contributes to the solvency of the national insurance system by

capping the liabilities of private insurance companies (World Bank, 2012).

To participate in the NAT/CAT regime, the French state requires insurance and reinsurance companies

to the build up their financial reserves through Equalisation Reserves

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to buffer years of high loss; the

system is so financially strong that state’s guarantee is rarely invoked (Paudel, 2012). Following years

of high losses, due to a large number of mining related subsidence claims in the late nineties, the

financial stability of the NAT/CAT was briefly threatened. The government and the insurance market

were, however, able to work together to agree changes that successfully restored the financial

stability of the system and they were able to agree voluntary measures to increase future risk

prevention.

Insurance is for property related losses not indirect losses such as non-productive business days.

Economic losses are not compensated by the NAT/CAT unless the specific terms of the insurance

policy allow for these (Faure and Bruggeman, 2007).