France: Promising Industry Outlook Despite Pressures

France’s insurance market is the largest in continental Europe, encompassing around 600 licensed carriers.

Notwithstanding 2020, which was strongly impacted by the COVID-19 pandemic, all lines of business have steadily grown over the last decade, and the market looks promising going forward.

The French market is worth more than €240 billion (US$259 billion). Life insurance comprises more than 70% of annual gross written premium (GWP). In property and casualty, commercial lines represent about 40% of annual GWP and show strong growth fueled by price and volume effects.

The recent rise in the number of catastrophic natural events on French soil, combined with emerging risks (cyber, riots) have pressured the market, with carriers particularly cautious when underwriting businesses for large exposures. But after a few years of price increases and hard underwriting conditions resulting from profit-centric strategies, carriers are now chasing top-line growth while remaining sensible toward volatility.

Market Dynamics: Context

• Employee Benefits > The insured employee benefits market has been significantly impacted by the pandemic, including an increase in occupational disability and mental health issues. Medical consumption remains strong, and the public administration has accelerated the transfer of financial sustainability to the private sector (private employers and insurers). Consequently, market conditions have worsened for insurers, leaving employers with limited options.
• Property & Casualty > After a few years of hardening conditions across most lines of business, the market is softening slightly and can be seen as two-tiered—good market conditions for well managed risks and difficulties in placing other risk classes. Most carriers are again reporting profits thanks to the positive effect of remediation and have returned their focus to growth. But while well managed risks can be transferred more easily and efficiently, capacity remains challenging for risks related to specific industries such as public transportation and recycling and waste or where large damages have made carriers wary of working with certain clients.

Market Dynamics: Pricing

• Employee Benefits > The French market has been reshaped by a material increase in the cost of insurance due to higher claims across all lines of employee benefits: medical, life, disability, and accident. With medical inflation remaining high, the French government amended the reimbursement basis applicable to mandatory insured medical plans. Moreover, high consumer price inflation led to an increase in medical tariffs. These cost-drivers increased financial pressure on employers and employees, with rates increasing consistently across all life insurance carriers.
• Property & Casualty > In property, rate increases continue heterogeneously depending on cat exposure and quality of risk. In casualty, increasing competition with a focus on top-line growth is putting downward pressure on rates. For other lines such as cyber and directors and officers liability, rates have slightly dropped for both primary and excess layers, mainly due to an influx of new capacity.

Market Dynamics: Underwriting

• Employee Benefits > In the post-pandemic environment, all life insurance carriers have aligned their market position to lower the break-even ratio and secured their margins, creating tough renewal conditions, lack of risk appetite, and reduced underwriting flexibility. Accidental death and disability rates have increased due to pension reforms that increased the normal retirement age by six months to two years depending on year of birth.
• Property & Casualty > Carriers remain focused on risk quality, and capacity is sometimes conditional on clients’ contractual commitment to a risk improvement plan. Cyber is softening thanks to new entrants offering disruptive, inclusive packages of services combined with significant improvement in insureds’ information systems security. Even with downward pressure on rates as a whole, capacity remains limited for clients with operations in the United States. That is particularly due to nuclear verdicts there.

Market Dynamics: Capacity

C

• Employee Benefits > Capacity in employee benefits has not been impacted by the post-pandemic environment. However, a few business sectors such as medical clinics and nursing homes have limited capacity due to high claims and few insurance players in this market segment. That is also the case for accidental death and disability programs due to shorter waiting periods that lead to claims’ being paid for a longer time.
• Property & Casualty > Insurers remain selective overall and tend to limit volatility by reducing their allocated capacities business by business, making co-insurance programs harder to complete. While many carriers have returned to the market with a growth mindset, there is still a lack of appetite for certain classes of risks (contingent business interruption, public transportation, agrifood).

Market Dynamics: Deductibles

D

• Employee Benefits > The French market for group medical insurance remains among the lowest in Europe for out-of-pocket expenses despite high inflation. This structural specificity is due to the combination of mandatory social security and mandatory private coverage governed by collective bargaining agreements.
• Property & Casualty > Deductible adequacy is a key focus as insurers tend to limit attritional losses. Insured companies often seek higher retention to optimize budgets. For large businesses, more clients are considering creating a captive, encouraged by a recent regulatory development, with the aim of embedding a primary layer for certain classes of risks. The French Finance Act for 2023 provides a more favorable regulatory framework for reinsurance captive companies domiciled in France. It, among other measures, allows them to establish a free-of-tax resilience provision to align with the mechanism existing in Luxembourg.

Notable Offerings and Consumer Demand

Employee Benefits > Due to strengthened market conditions, many employers are reinforcing or designing their wellness programs and cost containment measures to address financial pressure. Specific initiatives are being implemented for mental health, absenteeism, and physical wellness. Private employers expect insurance carriers to bear these costs.

Regulatory Update

General Data Protection Regulation

The European Union’s General Data Protection Regulation (GDPR), applied since 2018, is seen as the toughest privacy and security law in the world in terms of requirements and penalties for infringement. It demands caution and client acceptance for any companies that process personal data for any purpose. Insurers and brokers are specifically monitored and must implement a GDPR culture across
their organizations.

The penalties are not just threats. The French Data Protection Authority (CNIL) recently fined a company €310,000 for using data supplied by data brokers for commercial prospecting purposes without ensuring that the individuals concerned had given their valid consent.

Corporate Sustainability Reporting Directive

In effect since January 2023, the EU Corporate Sustainability Reporting Directive requires companies to report on a broad range of sustainability topics in line with standards set by the European Union. The directive covers companies with 500 or more employees or annual revenue exceeding €40 million (US$43 million) and will be extended progressively to smaller businesses.

Natural Catastrophe Compensation Scheme

Established by French law in the 1980s, this scheme guarantees all French citizens compensation for material damage caused by a natural phenomenon. The national law requires insurers to include coverage for damage caused by floods, drought, and other natural disasters in every insurance contract covering property located in French territory. This public-private scheme is funded by a unique additional premium rate applied to all property contracts, reflecting the principle of solidarity since all policyholders contribute to financing regardless of their risk exposure. The scheme is reinsured by the French Public Reinsurer (CCR), offering unlimited cover to companies and backed by state guarantee.

However, carriers are concerned about the scheme’s financing, which is threatened by expected cost increases. The total cost of damages caused by natural disasters on French soil was
€10 billion in 2022 and €6.5 billion in 2023—both figures far above the €3.7 billion annual average between 2010 and 2019. In response, the French government in January 2025 will increase its additional premium charged on property damage policies to 20% from 12%.

Notable Differences from U.S.

Don’t Miss New Year’s Day

Most business insurance contracts are renewed on Jan. 1 of each year. This generates significant seasonality in the insurance sector. At the start of the year, insurers take stock of the latest renewals and check client satisfaction. Prospecting begins afterward, often with calls for tenders before summer. The final stretch of insurer negotiations takes place between mid-September and mid-December.

Regulations

Traditionally, the French insurance market is more regulated than the U.S. market. Every company must provide employees with a medical plan with a framework widely set by the government and with costs shared between employers and employees. France therefore has a co-sharing healthcare system based on the principle of universality and led by a public nonprofit sickness fund that can be supplemented with additional coverage by private companies. Depending on the company culture and the business sector, design and management of the additional plans can be carried out by the human resources manager and the company’s broker, jointly with employees, or even solely by unions/employee representatives.

3 Tips for Doing Business in France

Localize

Remember that Europe is not just one country. To do business in France, you will need contracts in French and local support.

Attract Talent

The fight for talent has been heating up over the last few years, and competition to attract and retain people is fierce within the insurance industry. To be competitive, a company must offer a clear statement of purpose, good work/life balance, and an attractive compensation package.

Network

Networking is key in the French business world. Decision-makers pay great attention to interpersonal relationships, and, apart from tenders, many new client acquisitions are initiated via personal connections built over time. Investing time and money to support industry associations or attend business events is worth considering if you intend to make your mark in France.