Contributed By Kennedys
Insurance law in France is mainly governed by the Insurance Code (IC), the Social Security Code, the Mutual Code, and the Financial and Monetary Code (FMC). In addition, other codes may apply, to a lesser extent, such as the Civil Code (CC). EU legislation also has a significant impact on French insurance regulation, for instance Directive (EU) No 2009/138/EC of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II Directive) or Directive (EU) No 2016/97 of 20 January 2016 on insurance distribution (the Insurance Distribution Directive). Finally, case law emanating from French courts is particularly important, in that it interprets and applies French Insurance law and, so doing, clarifies insurers’ and policyholders’ respective rights and obligations.
Reinsurance, for its part, is governed by not the Insurance Code, but the Civil Code. To that extent, reinsurance practice benefits from greater contractual freedom than insurance practice. Moreover, French reinsurance practice is, to a significant extent, influenced by English reinsurance practice, whether in terms of product design or dispute resolution.
In France, insurance and reinsurance activities are regulated by an independent administrative authority, the French Prudential Supervision and Resolution Authority (ACPR). It licenses and controls insurance and reinsurance as well as banking activities. The ACPR has three functions, namely:
The ACPR is a member of the European Insurance and Occupational Pensions Authority (EIOPA) created on 1 January 2011, one of the three supervisory authorities of the European System of Financial Supervision. It is independent, but reports to the European Parliament, the Council of the European Union and the European Commission.
To be authorised to write insurance or reinsurance, any new insurance or reinsurance company must respect the licensing procedure as set out in Articles L321-1 to L321-3, and R-321-1 to R321-5 of the IC.
The ACPR can grant licences either conditionally or unconditionally or altogether refuse to grant them. Its decision is based on the following criteria:
Moreover, most insurance undertakings operating in France must respect the EU Solvency II Directive. Accordingly, they must have a governance system that ensures sound and prudent management, comply with minimum capital requirements, have an adequate risk management system, and organise regular internal reviews.
The ACPR grants licenses to insurance undertakings for specific categories of business. Applicants must choose among 26 categories listed in the Article R 321-1 of the IC. Insurance companies cannot be listed for both life and non-life insurance business, unlike reinsurance companies.
Article 991 et seq of the General Tax Code regulates the French insurance premium tax (IPT), which applies to all insurance policies covering risks situated in France.
Regarding insurance undertakings that are not established in France, they must be registered with the French tax authorities and assign a representative who is responsible for paying the IPT.
The rate of the IPT depends on the insured risk, and can vary from 7% to 33%.
The approach of French jurisdiction to overseas based insurers, or reinsurers doing business in France or with counterparties in France, varies depending on where the insurer or reinsurer is registered.
Insurance and Reinsurance Companies Registered in an EU Member State or in an EEA State
Pursuant to Articles 147 to 149 of the Solvency II Directive, the freedom to provide services and the freedom of establishment allow any insurance company authorised in a Member State to carry on its insurance activities throughout the European Union.
A non-French insurance undertaking wishing to exercise its freedom to provide services must have received authorisation from the supervisory authorities of its home State for its activities. The Directive provides that the authorisation granted by a Member State is valid for the whole EU territory.
The 2005 European Directive facilitated the conduct of reinsurance business within the European Economic Area (EEA) by extending the European passport system to reinsurers. Thus, the approval issued by the Member State authorities of the reinsurer’s head office is valid throughout the EEA. The reinsurer can then act, outside the Member State in which its head office is located, under the freedom to provide services or the freedom of establishment (Article L. 310-1-1-1 of the IC).
Other Foreign Insurance and Reinsurance Companies Operating in France
Foreign insurance companies located outside the EU and the EEA may only operate in France after obtaining an administrative licence and a special licence for the benefit of a general representative (Article L 310-2, I, 4° and L 329-1 of the IC).
Reinsurers whose head office is not located in the European Economic Area, may also reinsure insurance companies established in France.
In principle, foreign reinsurers cannot be treated more favourably than European reinsurers (Article L 310-1-1 of the IC). However, these reinsurers may benefit from the same rules as European reinsurers when the regulations of their head office country are deemed to be "equivalent" to the EU regulations. This equivalence system was necessary to comply with the World Trade Organization agreements and in particular the General Agreement on Trade in Services aimed at liberalising international trade in services.
In practice, equivalence allows them to reinsure European companies under the same conditions as European reinsurers. These "equivalence" decisions are taken by the European Commission. On 5 June 2015, the Commission granted equivalence for a period of ten years to six such countries: Australia, Bermuda, Brazil, Canada, Mexico, the United States, while Switzerland was granted unlimited equivalence.
There is no limitation in France on the introduction of fronting arrangements by reinsurance companies. Moreover, there is no obligation for the cedant to retain any share of the risk.
The volatility of the stock markets at the end of 2018 and the continued increase in transaction prices did not slow down the pace of French merger and acquisition activity in 2019.
The major insurers are redistributing their development efforts on corporate risks and reconsidering their presence in mature global markets. At the same time, distributor networks are increasingly being targeted by a growing number of private equity players.
Life insurance, however, remains constrained by the European Central Bank's accommodative monetary policies.
Finally, entities that offer both banking and insurance services are positioning themselves to benefit from anticipated regulatory changes in collective investment schemes.
In France, most insurance products are distributed by traditional actors: brokers, general agents and, directly, by employees of the insurance company. However, new ways of distributing insurance are emerging: online insurance comparators websites, insurtech, high street banks that increasingly offer insurance products etc.
The Insurance Distribution Directive, which came into force in France on 1 October 2019, changed the European Union’s legal framework for insurance distribution.
Firstly, it modified Article L 112-2 of the IC, as a consequence of which insurance distributors must now provide their clients with a standardised document that summarises the key characteristics of the envisaged insurance contract.
Secondly, the scope of the applicable regulation has been broadened. Indeed, Article L 511-1 and seq and Articles R 511-1 and seq of the IC – which regulate the activity of distributing insurance products – now also apply to the distribution of insurance products over the internet and over the telephone. Moreover, Article L 511-1 which used to apply only to intermediaries who undertook distribution as a principal activity, now also applies to insurance companies and includes most distributors who undertake this activity on a secondary basis.
Finally, according to Articles A512-6 and A513-7 of the IC, insurance company employees, general agents and brokers must hold a master’s or bachelor’s degree or professional certificate in finance, banking or insurance.
Article L 113-2 of the IC governs the policyholder’s disclosure obligations, which mainly consists in completing a questionnaire drawn up by the insurer, as well as answering any questions clearly phrased and submitted by the insurer by other means (letter, fax, email etc).
As a matter of French insurance law, the insured is under no obligation to spontaneously disclose information that might be relevant to the policy and the scope of its disclosure obligations is exclusively determined by the insurer’s questions. However, if the insured does elect to spontaneously disclose information, then the statements must be accurate and truthful, otherwise the contract could be avoided for fraudulent misrepresentation.
During the life of the policy, the policyholder also has a continuous duty to disclose all changes relating to the information that was disclosed in the insurance questionnaire or in response to the insurer’s questions, at inception.
Pursuant to IC Article L 112-3, if the insurer’s questions are not sufficiently clear and precise, the insurer cannot, in turn, rely on the fact that the insured’s answers are vague or unreliable to try to limit or deny coverage. It is therefore of paramount importance that insurers draft their subscription questionnaires with this principle in mind and draft individual questions in a sufficiently precise fashion.
Policyholders’ Failure to Comply with their Obligation to Provide Information
The IC provides sanctions, in the event that policyholders fail to comply with their legal obligations to disclose relevant information – whether upon inception of the insurance contract or during its lifespan. These sanctions vary depending upon whether the inaccurate answers (or lack of disclosure) were made in good or bad faith.
If the inaccurate information or lack of disclosure was made deliberately and in bad faith, and it influenced the insurer when deciding to provide cover or setting the amount of the premium, then the insurer can avoid the policy, which will be deemed to be null and void.
However, if the insured was in good faith when he or she provided the information at issue or failed to disclose it, the IC provides a more forgiving sanction: the policy will not be deemed null and void, but the indemnity owed by the insurer will be reduced, according to a rule of average (based on the premium the insurer would have requested, had the risk been accurately disclosed).
Insurers’ Failure to Comply with their Obligation to Provide Information
Insurers’ obligation to provide information is set out in Article L 112-2 of the IC, which provides that, before entering into the insurance contract, the insurer must provide the potential insured with:
The IC does not provide any sanctions in connection with insurers’ possible failure to deliver the information notice or a copy of the proposed insurance contract. Established case law, however, holds that, if insurers failed to bring the contents of certain clauses to the insured’s attention (for instance, the contents of exclusion clauses or forfeiture clauses), then the insurer will not able to invoke them against the insured and they will be deemed unenforceable.
Furthermore, as Article L 112-2 requires the information to be provided prior to entering into or amending the insurance contract, insurers cannot remedy the situation by providing the information in question at a later date.
When an intermediary is involved in the negotiation of an insurance contract, it can act on behalf of the policyholder or the insurer, depending on the nature of the contractual relationship.
The insurance broker’s role is to source the policies that are best-suited to the profile of its policyholders, in terms of protection, guarantees or rates. He or she then takes care of the administrative set-up of the contract and negotiates its terms. Brokers provide clients with pre-contractual advice on premiums and coverage, therefore, they fall under the category of insurance distributors. As such, they have legal obligations in relation to the pre-contractual information and advice they provide.
Insurance brokers also assist with claims handling. They assist the policyholder or insured in case of a loss, including during the investigation and the adjustment of the loss. They may also advise insurers when choosing the party appointed adjusters. The broker’s involvement regarding the handling of the claim depends on the extent and complexity of the loss and the sophistication of the insured.
Brokers can, however, also act on behalf of the insurers, for instance by collecting premiums owed under the policy.
In principle, the insurance contract is formed by the meeting of an offer and an acceptance by which the parties demonstrate their will to be bound. It is a consensual contract, therefore, the consent given does not have to take a specific form, it may be express or implied.
However, pursuant to IC Article L 112-4, policy clauses that stipulate nullities, forfeitures or exclusions shall be valid only if they appear in very clear print (for instance, in bold, or underlined, or both – so that the layout of the contract itself immediately brings the insureds’ attention to such clauses).
Moreover, to be valid, the insurance contract must be based on an insurable interest. It is indeed required that the interest exists on the day of subscription for the insurer to be liable for the coverage. The notion of the insurable interest is expressly referred to in Article L 121-6, paragraph 1, of the IC, which provides that any person having an interest in the preservation of a thing may have it insured.
Finally, according to Article L 112-4 of the IC, the insurance policy is dated the day it is issued, and it indicates:
The policy also indicates:
Finally, insurance contracts’ legal requirements vary depending on the nature of the risk. Indeed, the insurance of “large risks” (as defined by the IC) allows for more flexibility than that of standard risks, against which consumers will take out insurance. For instance, “large risks” insurance contracts, unlike consumer or standard insurance contracts, are not subject to the following:
In the context of a group insurance, the policyholder is bound to provide the members with a notice prepared by the insurer defining the coverages and their terms and conditions of entry into force as well as the formalities to be completed in the event of a claim. He or she must inform participants in writing of changes in their rights and obligations at least three months before their expected effective date.
Moreover, credit institutions which engage in insurance operations of any kind are subject to the ordinary rules applicable to all insurance intermediaries. The loan insurance operation must comply with the rules applicable to the distribution of non-life insurance, principally the following:
The credit institution satisfies the membership formalities by issuing borrowers with an insurance application form, also known as a membership application or individual membership application form. In practice, this document is not necessarily separate from the loan contract, as the application for membership may be included on the same form. In this case, however, it is required that the borrower's membership be evidenced by a signature separate from that showing his acceptance of the offer of credit.
Finally, under French insurance law, the beneficiary of the loss payee clause, can act directly against the insurer for payment of the benefit provided for in the contract.
Reinsurance leaves the field open to contractual freedom. Built on a practice that is not inclined to strict drafting, certain clauses can radically change the economics of the treaty.
In France, reinsurance practice is not governed by the Insurance Code, but by the principles of the Civil Code. Reinsurance therefore benefits from greater contractual freedom than the insurance practice. Moreover, French reinsurance is influenced by the English practice, both in terms of product design and dispute resolution.
“Large risk” insurance contracts are more regulated than reinsurance contracts, though their regime still allows a certain degree of flexibility, whilst “standard” or consumer insurance contracts are heavily regulated and must abide by numerous and detailed requirements, which are all aimed at protecting the insured, as a consumer and the less sophisticated of the two parties in the insurer-insured relationship.
All risks (property damage, personal injury, liability, life) corresponding to classes 1 to 26 of Article R 321-1 of the IC may be transferred to a securitisation undertaking, as an Alternative Risk Transfer (ART), either by insurance or reinsurance undertakings, or by another insurance risk securitisation vehicle.
Indeed, Order No 2008-556 of 13 June 2008 introduced the possibility for securitisation undertakings to bear insurance risks, and it defined the regime applicable to securitisation transactions carried out by French insurance and reinsurance companies.
In accordance with Article L 214-189 of the MFC, a securitisation undertaking must obtain the ACPR approval to be allowed to bear insurance risks. The ACPR verifies that:
Securitisation undertakings underwriting insurance risks are in fact subject to dual supervision, first the approval of the securitisation undertaking by the ACPR; and second the supervision by the Autorité de marches financiers (AMF) of the securitisation undertaking's management company.
However, according to Article L 310-1-2 of the IC, contracts by which a securitisation vehicle assumes an insurance risk do not constitute insurance contracts.
Securitisation vehicles can bear insurance risks by entering into a contract transferring these risks from foreign insurance or reinsurance undertakings, or from foreign securitisation vehicles.
In case it transfers risks from a foreign securitisation vehicle, such vehicle has to be approved by a Member State of the European Union or by a State party to the agreement on the European Economic Area, under the conditions mentioned in the Directive on the taking-up of the business of insurance or reinsurance.
Such Directive specifies that the foreign securitisation vehicle, in order to be authorised, must comply with rules concerning:
However, the IC specifically defines reinsurance as the activity of an entity other than a securitisation vehicle.
The main principle to interpret an insurance contract is to respect the will of the contracting parties. Hence, when the policy is clear, the courts must merely apply and enforce it. However, in case the policy is ambiguous and needs to be interpreted, the courts and parties can use extraneous evidence about the negotiations, the circumstances in which the contract was placed, or the “usual practice”. They can also refer to the contractual interpretation guidelines provided in the Civil Code (Articles 1188 et seq), which are as follows:
Additional rules regulate the interpretation of an ambiguous policy. French insurance law tends to be pro-consumer and consequently pro-insured. Ambiguous policy provisions are therefore often interpreted in the fashion that is most favourable to the insured (which may, in turn, lead to their being set aside).
Firstly, according to the French Consumer Code, if the insured is a consumer then the ambiguities must be interpreted in its favour.
Secondly, in case of ambiguities, the non-negotiable standard terms contract shall be interpreted in the way that is least favourable to the insurer.
Thirdly, the French Insurance Code adds that certain key clauses, such as exclusion clauses, must be readily understandable by the insured upon first inspection. The aim is to prevent any doubt regarding what is covered and what is excluded from coverage. Any exclusion clause that requires interpretation will be automatically set aside for not being readily understandable, and therefore violate the relevant imperative rules set out in the French Insurance Code.
There is an implied warranty in the insurance contract, which is a promise by the insured that statements affecting the validity of the contract are true. Moreover, IC Article L 113-2 provides that the insured must answer the questions asked by the insurer in a truthful fashion.
Policies can include conditions precedent, such as, for instance, a condition precedent stipulating that the insurance contract will not be deemed to have been entered into or be binding until the first premium has been paid.
Policies can also include coverage conditions, which are distinct from conditions precedent. Indeed, no insurance contract will be deemed to have ever existed unless the condition precedent is met, whereas coverage conditions, if they are not satisfied for a time, will merely suspend the insurer’s obligation to provide insurance cover during the relevant period – and the insurer’s cover obligation will resume as soon as the condition is satisfied again. Such conditions are frequent in relation to insurance cover for breaking and entering or theft, where the insurer’s cover obligation is conditional upon certain security measures always being maintained (such as the presence of a functioning alarm system protecting the risk).
It should be borne in mind that coverage conditions are distinct from exclusion clauses, as a consequence of which their validity is not subordinated to appearing in bold print in the contract or being drafted in a readily understandable fashion and with a narrow scope.
To address the disputes under an insurance contract, the insurers can add a mediation and conciliation clause in their policies.
The requirements regarding theses clauses are not the same depending on the identity of the insured. For instance, “large risks” insurance contracts can stipulate mediation and conciliation clauses, with no obligation to specify the exact means to initiate mediation. However, if the insured is a consumer, the insurance contract must indicate how to initiate the mediation, pursuant to Article L 112-2 of the IC. When the insured is a consumer, arbitration clauses contained in the insurance contract are automatically deemed null and void.
In accordance with the applicable case law, if an insurance contract contains a conciliation clause or a mediation clause, the parties must go through these steps before they may take legal action.
The limitation period that applies to claims relating to the performance of insurance contracts is of two years, pursuant to IC Article L 114-1. This time limitation period only starts to run from the moment the insured becomes aware of the loss. It can be interrupted by the insured by sending a letter to the insurer to that effect via registered mail with confirmation of receipt.
The time limitation period can only be successfully invoked by the insurer if the policy at issue reproduces the sections of the IC that govern the time limitation period and indicate how it can be interrupted.
Choice of Jurisdiction
In the absence of a clause conferring jurisdiction, the jurisdiction is determined according to the rules of private international law. For French courts, these rules derive from four texts:
The criterion for the application of these texts is the domicile of the defendant.
Choice of jurisdiction for defendants domiciled outside the European Union or the European Free Trade Association
For defendants domiciled outside the European Union or the European Free Trade Association, the international jurisdiction of French courts is determined by extending the rules of internal territorial jurisdiction.
Among these rules of internal territorial jurisdiction several articles apply:
These articles establish a jurisdictional privilege in favour of litigants of French nationality. Article 14 provides that a foreigner, even if not residing in France, may be cited before French courts for the performance of obligations contracted by him or her in any country, with a French person; Article 15 adds a privilege of exclusive jurisdiction and provides that a French person must be brought before a court of France for obligations contracted by him or her in a foreign country, even with a foreigner.
Nonetheless, Article R 114-1 of the IC derogates from the ordinary rule of jurisdiction, ie, the jurisdiction of the court of the defendant's domicile. Indeed, this rule would oblige the insured to cite their insurer before the court of the company's registered office in the event of a dispute.
Consequently, French law has established, regarding insurance matters, that in all proceedings relating to the determination and payment of an insurance indemnity, the defendant is brought before the court of the insured's domicile. However, there is an exception to this rule if the dispute relates to buildings, in which case the defendant is then cited before the court of the location of the insured objects. Moreover, in the case of insurance against accidents of any kind, the insured may cite the insurer in the court of the place where the event occurred.
Defendant domiciled in an EU Member State, Switzerland, Norway or Iceland
If the defendant in the action is domiciled in an EU Member State, Switzerland, Norway or Iceland, the standards that apply will be the Brussels I bis Regulation, and the revised Lugano Convention.
The said regulation tends to protect the weaker party. Thus, an insured, beneficiary or policyholder can decide to claim against an insurer either in the courts of the Member State where the claimant is domiciled, or the Member State where the insurer is domiciled, for example. On the contrary, the insurer has no choice and must claim in the courts of the Member State where the defendant is domiciled.
Choice of Law
In insurance matters, conflicts of law are governed by two distinct sets of rules:
To determine which sets of rules apply, it is necessary to locate the risk situation. Indeed, when the risk is located outside the EEA, then the Rome Convention will determine the applicable law.
For risks located in the European Economic Area, the law is based on the rules laid down by the national transposition of European directives:
On one hand, regarding life insurance contracts, the main rule is expressed by Article L 183-1 of the IC, which indicates that when the agreement is made in France, the contract shall be governed by French law, to the exclusion of any law. However, if the policyholder is an individual and national of another member State of the European Economic State, the parties to the insurance contract may choose to apply either French law or the law of the State of which the policyholder is a national.
On the other hand, as to non-life insurance contracts, Article L 181-2 of the IC says the contract shall be governed by the law of the State with which it has the closest links. The contract is presumed to have the closest links with the Member State of the European Economic Space where the risk is located.
The parties may derogate from this connection principle by choosing the applicable law, as offered to them in Articles L 181-1 and L 181-2 of the IC. But said choice must be express or result with certainty from the clauses of the contract or the circumstances of the cause. Finally according to the Article 13 of the Brussels I bis Regulation and Article 11 of the Lugano Convention, the injured party may bring a direct action, but only if it is possible to do so according to the applicable law.
The victim will therefore be able to bring the civil liability insurer before the court of the Member State or contracting State before which he or she has sued the liable insured. However, the latter has other options of jurisdiction.
As direct actions against the liability insurer of the alleged liable party are allowed under French law, it is therefore possible for the injured party to bring a direct action in front of French courts.
Insurance disputes in France are litigated in the following tribunals:
The first instance commercial court or the first instance civil court have jurisdiction subject to the identity of the parties (are the parties deemed to be civil or commercial entities) and the amounts at stake (is the claim below or over EUR10,000).Decree No 2019.912, which has come into force on 1 January 2020, repeals the quantum rule and merges the County Court and the High Court, which now constitute a single Court, the Tribunal Judiciaire.
Once the first instance decision has been handed down, the parties that wish to do so can bring an appeal, without seeking prior permission. The distinction between civil and commercial entities disappears upon appeal, as the Courts of appeal hear both types of cases alike.
Once the Court of appeal has rendered its decision, it is possible to bring a second and final appeal, before the French Supreme Court, but only if it relates to a point of law, as the French Supreme Court only hears appeals on these.
In France, to force the counterparty (defendant or debtor) to comply with the judgment against him or her, the party will have to go to the enforcement authorities. They alone have the power to force the debtor to pay, calling on law enforcement if necessary.
Under the Brussels I Regulation (recast) which governs the recognition and enforcement of judgments in cross border cases, if the party has an enforceable judgment issued in the Union Member State, it can go to the enforcement authorities in any other Member State, for example where the debtor has assets, without any intermediary procedure being required. The Regulation abolishes the 'exequatur' procedure. The debtor against whom the party seeks the enforcement may apply to the court requesting refusal of enforcement.
The purpose of enforcement is generally to recover sums of money, but it may also be to have some other kind of duty performed (duty to do something or refrain from doing something, such as to deliver goods or finish work or refrain from trespassing).
In practice, the party needs to have an enforceable document (a court judgment or a deed) if it wishes to apply for enforcement. The enforcement procedures and the authorities who handle them (courts, debt-collection agencies and bailiffs) are governed by national law of the Member State where enforcement is sought.
Foreign decisions taken in third countries, that is to say outside of the European Union, can be enforced via the exequatur proceeding.
Arbitration clauses in commercial insurance and reinsurance contracts can be enforced as any arbitration clause in other kinds of contracts. To be valid and enforceable the arbitration clause must have been accepted by the party to whom it is opposed. Moreover, arbitration clauses are not enforceable against non-professionals, that is to say persons who did not entered the contract in the course of their professional activity.
A standard arbitration clause for insurers and reinsurers to use has been prepared by The French Centre for Reinsurance and Insurance Arbitration, (CEFAREA-ARIAS), which is an association created to promote arbitration and mediation in the field of insurance and reinsurance.
According to Article 1487 of the French Code of Civil Procedure, if amicable enforcement is impossible, the award can be enforced via an exequatur order. An enforcement or exequatur order is the act by which the exequatur judge orders that an arbitral judgment be executed.
Excluded from the scope of the Brussels Convention, international arbitration is governed by international conventions, the most important being the New York Convention of 10 June 1958. However, this convention is not often applied for exequatur proceedings in France. Indeed, it specifies that rules of State of origin may apply when they are more favourable to the recognition of awards. As French law is liberal on this point, it is essentially the rules of the Code of Civil Procedure that are to be applied.
Regarding insurance disputes, and to comply with the new requirements of the European Directive (2013/11/EU) on the Alternative Dispute Resolution of Consumer Disputes, insurers have set up, within the framework of the Fédération française de l'assurance, a unique mediation system, managed by an association called La Médiation de l' assurance.
Insurance companies that are members of the Fédération française de l’assurance – ie most companies – have undertaken to join the association La Médiation de l'assurance and to respect the terms of its mediation charter.
The mediator is appointed for three years, and the charter of La Mediation de l'assurance defines its powers, as well as the rules applicable to mediation in assurance. The mediator is competent to deal with disputes that may arise between individuals and insurance companies in order to seek amicable solutions.
In addition, mediation may be extended by agreement to other disputes, such as disputes with a third-party beneficiary, or disputes relating to professional insurance, excluding large risks.
According to the mediation charter, the mediation process is a written one, the insurance companies and intermediaries having a maximum period of five weeks to respond to requests for information or documents from the Insurance Ombudsman. As it is a mediation, however, the opinion that is finally handed down is not binding upon the parties.
In France, in the event of delay in compensation, the insurer may be required to pay damages to the insured. If the insurer is late to comply with its obligations, the insured must send a summons to perform its obligation to pay the insurance indemnity, in the form of a registered letter with acknowledgement of receipt. Interest starts to accrue from the time the registered letter is received by the insurer.
Regardless of the type of insurance, the interest is based on the indemnity owed by the insurer and is calculated based on the statutory rate of interest in force at the time.
The IC indicates specific rules as to delays and interests regarding:
In France, insurance companies tend to enter into partnership strategies with insurtechs, as they often perceive them as means of accelerating innovation and digitalisation. Insurance companies are generally trying to make the most of Insurtechs' strengths (agility, technology) without being exposed to some of its perceived weaknesses (financial fragility, operational risks). Naturally, there is no one single way to proceed and insurers' approaches are quite varied: some are staking on significant partnership opportunities, through different funds and structures, whilst others are adopting a more selective strategy, focusing mainly on technological partnerships with more limited scopes.
Some of the criteria that are commonly relied upon to select insurtech partners are:
Four channels of co-operation are used by the various insurers, which are often jointly used:
In France, most insurtechs identified in the market operate as insurance brokers. Therefore, they mainly have to register at the Organisme pour le registre des intermédiaires en assurance (ORIAS); and to respect the regulation that apply to insurance intermediaries.
However, in 2019, two insurtech startups obtained authorisations from the ACPR to carry out insurance business in France. They will, therefore, bear the financial risks associated with their insurance business and will not rely on a partnership with existing insurance companies, as is usually the case.
At the same time, the EIOPA implemented an InsurTech Task Force (ITF) to work on issues and aspects arising from InsurTech. In particular, the ITF analyses the use of Big Data by (re)insurance undertakings and intermediaries (both incumbents and start-ups). Furthermore, the ITF maps the supervisory initiatives undertaken by the different jurisdictions in the areas of InsurTech, with a view of establishing efficient and effective supervisory practices. At a later stage, the ITF will also concentrate, among other tasks, on the convergence on supervision of algorithms and explore the benefits and risks arising from the use of blockchain and smart contracts for (re)insurance and consumers.
According to the 2019 Fédération Française de l’Assurance report on emerging risks, cyber risk is currently considered to be the main preoccupation for insurance and reinsurance companies. Insurers operating in France are still developing new insurance products to best meet the needs of the market and respond to this emerging type of risk.
To address these risks, a legislative framework has been established at the French level with the Law of Military Programming 2019-2025, and at the European level with the Network and Information Security (NIS) Directive, in order to strengthen the security of sensitive information systems.
Moreover, the ACPR recently warned insurers that in view of the increasing exposure of companies and individuals to cyber risk, cyber insurance is one of its control and oversight priorities. In this context, it has identified the following areas for improvement:
According to the 2019 Fédération Française de l’Assurance report on emerging risks, climate change is one of the main preoccupations for insurance and reinsurance companies today. In France, climate change is generating more frequent and more damaging natural disasters, such as the recent floods in the Aude, hailstorms in the Charente or, particularly, hurricanes Irma and Maria, in the French West Indies.
In France, the monitoring of climate risk for the financial sector was introduced by the Law on Energy Transition for Green Growth (LTE) adopted in August 2015. Article 173 of this law requires all institutional investors to publish information on how they take into account, in their investment policy, criteria relating to compliance with Environmental, Social and Governance (ESG) objectives and on the means implemented to contribute to the energy and ecological transition.
As part of its supervisory tasks, the ACPR is responsible for verifying that all insurance undertakings apply the content of Article 173 of the LTE.
Furthermore, the EIOPA has provided, on 30 April 2019, the European Commission an opinion recommending a better consideration of environmental risks by the Insurance Distribution Directive and Solvency II. This opinion suggests that the European Commission should amend several articles of the delegated Solvency Regulations II and Insurance Distribution Directive to better integrate sustainability risks into Pillar 2 of Solvency II, in particular the articles relating to the principle of the prudent person, the management function of risks, the actuarial function, and the compensation policy.
In France, new products and alternative are being developed to address the cyber risk. For instance, since 1 October 2019, the Ministry of Economy and Finance provides French companies a cybersecurity self-diagnosis toolbox, easy to access, practical and free of charge. The company must go to the to find out its level of security in four key areas of computer security: passwords, data backups, messaging and browsers.
Furthermore, insurance companies have launched new insurance products in 2019 to best meet the needs of the market. For instance, a broker has recently launched a cyber offer targeted at individual consumers, in relation to possible risks relating to internet use. The offer covers five types risks:
More established insurance companies have, for their part, widened their range of insurance products to help SMEs face cyber attacks. The new range of cyber risk insurance offers several customised offers, depending on the turnover and risk typology of the companies. These insurance contracts provide cover in relation to the prejudice suffered as a result of cyber attacks and may also provide specialised assistance to the insured.
Based on a survey carried out by the ACPR among all French insurers in 2018, and information published by insurers pursuant to Article 173 of LTE, the ACPR has noted that most insurers implemented the following steps in connection with this emerging type of risk:
There have not been any significant changes to the French insurance law landscape in 2019. However, several decisions related to time limitation are worth noting.
In line with French insurance law, insurers must quote the provisions of the French Insurance Code that indicate the two-year time limitation, as well as the means to suspend or interrupt it. The time limitation period can only be successfully invoked by the insurer if the policy at issue reproduces the sections of the French Insurance Code that regulate the time limitation period and explain how the insured can interrupt it.
A Cour de Cassation decision handed down on 18 April 2019 held that the insurer must prove the compliance of the above obligations in the policy, on the contrary, the insured does not have to prove the policy did not quote all the relevant provisions in full. (Cass 2nd Civ, 18 April 2019, No 18-13.938)
In a previous decision, handed down by the Cour de Cassation on 21 March 2018, the Court had already stressed insurers’ obligations to quote all the necessary provisions regarding time limitation in their policies, so as to be in a position to invoke time limitation against the insured. It added that, if the insurer had failed to do so, it could not invoke the standard five-year time limitation period provided by the French Civil Code as some form of fallback regime (Cass Civ 3rd, 21 March 2019, No 17-28.021).
These decisions are important, as they could suggest that, when the insurer does not reproduce the relevant provisions in its policies, it finds itself in a situation where no limitation period of any kind could successfully be invoked against the insured. This means the insurer in question would be exposed to possible claims from the insured until the end of the absolute cut-off period (“délai butoir”), that is to say 20 years – that is, in any case, a position the Paris Court of Appeal seems to have adopted, in a recent decision (CA Paris, 16 May 2017, No 16/09576).
On 7 February 2019, Order 2019-75 regarding Insurance Financial Services Preparation for the Withdrawal of the United Kingdom from the European Union was published in the Official Journal.
The Order governing the implementation of Brexit was issued pursuant to Article 2 of the Law No 2019-30 of 19 January 2019, which empowers the government to regulate measures to prepare for the United Kingdom's withdrawal from the European Union. It will enter into force from the date of a Brexit (without agreement) concluded in accordance with Article 50 of the Treaty on European Union.
The Order clarifies the rules applying to insurance contracts concluded before Brexit on the basis of the European passport and introduces a new Article L 310-2-3 in the IC. The purpose of this new Article L 310-2-3 is, by clarifying the current legal framework, to ensure the protection of French policyholders, while encouraging the transfer - to the European Union - of the insurance activity that could be carried out by British companies in France as a result of Brexit.
The Order confirms the obligation to perform contracts validly taken out, even where the insurance undertaking has lost its European passport and is no longer able to enter into new commitments. Consequently, the policyholder would still be obliged to pay the premiums, and the insurer to the settle the claims.
However, contracts validly taken out in France - under the freedom to provide services or the freedom of establishment - with an insurer governed by United Kingdom law may not be renewed (that prohibition includes cases of automatic renewal).
While the Order does not explicitly rule on the continuation of British companies’ activities post-Brexit, the prohibitions on renewal and on insurance operations giving rise to the issue of premiums indicate that the conclusion of any new contract after Brexit by British entities will be prohibited. Indeed, as from Brexit, British insurance institutions will become third country companies, and will thus lose the benefit of their European passport.
Furthermore, the report states European customers who wish to continue the operations they are used to carrying out with UK service providers will have to turn to financial service providers which are authorised to provide services within the European Union.