2 CCR,

STATE OWNED REINSURER

As a public reinsurer, in the general interest, CCR provides companies operating in France, with Stateguaranteed coverage against natural catastrophes and other exceptional risks. As risk manager for the French State, CCR collects extensive data on extreme risks and insured assets, modelling these risks and sharing its knowledge with the government and the market for better risk prevention. Finally, CCR is also responsible for the accounting and financial management of public funds on behalf of the State.

2021 was marked by the end of public reinsurance schemes for inter-company credit, a lower drought loss experience, the reform of Nat Cat compensation and the creation of the new public guarantee scheme for tour operators.

“FOR THE FIRST YEAR SINCE 2016, FRANCE WAS NOT AFFECTED BY A MAJOR DROUGHT AT NATIONAL LEVEL.”

ANTOINE QUANTIN,

Chief Underwriting Officer, Public Reinsurance and Guaranty Funds

2021 A MORE LENIENT YEAR IN TERMS OF NATURAL CATASTROPHES

In contrast to several of its European neighbours (Germany, Belgium, Luxembourg), France was generally spared from natural disasters in 2021. Fortunately, there were no major events to report.

A SERIES OF MEDIUM-SIZED EVENTS

France however suffered a series of medium-sized events throughout the year:

- floods in South-West France in February

- a succession of thunderstorms throughout the summer: thunderstorms affecting the Seine-Normandy basin at the beginning of June, then over the Paris basin and Champagne in mid-June, and finally thunderstorms in the north-east of France in mid-July

- very heavy rainfall in the Gard in September, then in South-Eastern France in October

- floods in South-West France in December.

A total of 2,408 communes declared in a state of natural emergency were published in the French Journal Officiel throughout the year 2021, compared to an average of 2,180 over the 2000-2020 period.

CCR estimates that it will have to pay €249.2 million in claims excluding droughts. With regard to droughts, the year 2021 was shaped by the ongoing management of claims from the very intense droughts that occurred from 2016 to 2020. Overall, drought-related losses over these five years are estimated at €2.5 billion for CCR, i.e. €500 million per year on average.

Flooding of the Seine on 5 February 2021.

A YEAR RATHER UNAFFECTED BY THE DROUGHT

In contrast to previous years, 2021 was rather unaffected by the drought. For the first year since 2016, France was not impacted by a major drought at national level. However, some departments were affected by a greaterthan-normal water deficit: this mainly concerned the south of France, from the Pyrenees to the Mediterranean, including Corsica. The departments of Charente-Maritime, Vendée and Loire-Atlantique were also particularly impacted. Some communes in Lorraine and Normandy were also affected. The cost of this event to CCR is estimated at €74.0 million.

2€323.1M

This is the amount of the 2021 claims for CCR, all perils combined.

REFORM OF THE NATURAL CATASTROPHE SCHEME

CONSOLIDATING THE SCHEME AND STRENGTHENING CCR’S MISSIONS

After many years of giving thought and work on the modernisation of the natural catastrophe compensation scheme, the year 2021 was shaped by the adoption of a reform enabling the consolidation of this system which sets France apart from many European countries.

On 28 January 2021, the French National Assembly adopted the bill presented by Deputy Stéphane Baudu. This white paper was then amended and voted in the Senate on 21 October, before a joint committee agreed on a common text. The law was published in the French Journal Officiel on 28 December 2021.

This law preserves the cornerstones of the scheme, specifically the recognition of the State of natural disasters by decree, the solidarity principle by which a single premium rate is applied to all policyholders regardless of their exposure, the public reinsurance offered by CCR, and the unlimited guarantee of the State. This law improves the transparency of the system, specifically the recognition process. It also specifies the time limits that apply throughout the compensation process. It also improves the compensation of victims by reforming the deductible mechanism, in particular by abolishing deductible increases, which were often seen as a double penalty for victims, and by extending coverage to certain additional items when they are mandatory,like emergency rehousing costs or architect and project managing fees.

The reform also addresses the specific issue of drought: the government will have to submit a report to Parliament by the end of the first half of 2022 on drought prevention and compensation.

Lastly, the reform strengthens CCR’s missions, which may be entrusted with studies on prevention policy, natural risks, their coverage and the financial balance of the scheme. 2022 will be devoted to drafting the implementing decrees, with a view to compensation changes coming into force on 1 January 2023.

Throughout the year, CCR worked with the French public authorities to shed light on the operation of the scheme and on future challenges, specifically in view of the consequences of climate change, and to carry out impact studies on the reform. Further work will be carried out in 2022 to put a more precise figure on the cost of the changes implemented and their impact on the financial balance of the scheme, depending on the parameters set out in the implementing decrees.

EXPERTISE AND MODELLING

EVER MORE OPERATIONAL CAT MODELS

The year 2021 was particularly rich for CCR in scientific fields. Indeed, two doctoral theses were successfully submitted in different fields but related to strengthening the modelling methods used to estimate the consequences of natural events.

A long-term research project (ANR PICS) was completed in 2021, with the creation and validation of an operational chain to forecast damage resulting from flash floods in South-Eastern France. In response to the request of risk prevention and management bodies, a new flood exposure map was designed and shared. With regard to the risk of drought, new methods have been implemented to forecast damage throughout the year, specifically by using an agro-climatic index developed as part of a thesis.

CCR’s models have been used to carry out exposure studies, in Morocco as part of a World Bank-funded project, and in France for RTE (Réseau de Transport d’Électricité). They are also used to carry out prevention studies, specifically as part of the agreement with the DGPR (French Ministry of Ecological Transition).

“TWO DOCTORAL THESES WERE SUCCESSFULLY SUBMITTED IN THE FIELD OF MODELLING.”

DAVID MONCOULON,

Head of the Modelling R&D Department - Cat & Agriculture – Reinsurance and Public Funds Division

TWO THESES PRESENTED IN 2021

The first is on meta-modelling and sensitivity analysis applied to coastal flooding models by Élodie Perrin (in partnership with BRGM and the École des Mines de Saint-Étienne); the other is on the creation of a stochastic earthquake generator for metropolitan France by Corentin Gouache (in partnership with the National School of Geology in Nancy). The objective of the latter is to characterise the seismic hazard in France.

For this purpose, plausible seismicity is generated over long periods (several hundred thousand years) based in time, on past seismicity and in space, on the fault network. Each earthquake is associated with an annual probability of being exceeded at each point in the territory. This thesis received a special mention at the 2021 Risk Science Award of the Optimind Foundation.

General diagram for the estimation of annual exceedance probabilities around Nice.

a: The FCAT experimental catalogue is analysed using the interevent-time method adapted to regions with low-tomoderate seismicity. This analysis provides the proportionmagnitude and frequency-magnitude distributions of main earthquakes to the earthquake generator.

b: A set of 100 stochastic 10,000-year catalogues of main earthquakes and synthetic aftershocks is then produced.

c: Seismic risk is calculated using weighted ground motion prediction models. The observation of the hazards produced by all the generated earthquakes gives the annual exceedance probability.

Example of simulated water levels and flows for the November 2014 event.

MODELLING THE FINANCIAL CONSEQUENCES OF THE FLOODS IN MOROCCO FOR THE WORLD BANK

During 2021, CCR provided an operational model for the assessment of flood consequences in Morocco on behalf of the FSEC (Fonds de solidarité contre les événements catastrophiques) and all private and public insurance players, in the context of a World Bank tender project won in collaboration with Atmoterra and Risk Weather Tech.

Flooding estimated by the Floodos model for the Aude River flood (2018).

ANR NOWCAST IMPACTS OF FLASH FLOODS (2017-2021)

The PICS project, funded by the French National Research Agency, focuses on short-term forecasting of flash flood impacts. The many partners in this project are Université Gustave Eiffel, Cerema, INRAE, Geosciences Rennes, Météo-France, CNRS, SCHAPI, IGE and CCR. The aim is to build up a modelling chain ranging from weather forecasts, to streamflow and overflow modelling but also the impact on people and property. This project also involves a group of users: fire brigades, SPCs (Flood Prediction Services), basin unions, communes, Willis Re, AXA, EDF and SNCF. These users help to guide the modelling choices and ultimately provide an operational tool for flood prevention and management.

Summary map of the impact of floods.

PPRODUCTION OF NEW FLOOD EXPOSURE MAPPING

Ongoing work to improve the hazard and damage models is being carried out to increase their accuracy and robustness and to benefit from new data. These improvements are based, for example, on a better characterisation of the terrain, by taking into account dykes or finer land use, or taking into account new meteorological data. They can also focus on methods, thanks to the research projects in which CCR is involved. This is the context of the multi-criteria analysis of the flood risk carried out in 2021, which made it possible to develop an exposure indicator combining information on the hazard and the loss experience, in order to characterise the flood risk in a consistent way throughout the French territory.

Change in multi-peril (non-auto) losses due to hazard and change in geographic population distribution (%) in 2050. Example of the result on an insurer’s portfolio.

THE ACPR PILOT EXERCISE

CCR participated in the climate exercise conducted by the ACPR from July 2020 to April 2021, which brought together the banking and insurance sectors to assess climate change by 2050 in the context of the law on energy transition and green growth and the 2015 Paris Agreement. CCR’s role was to measure these consequences on the portfolios of the insurers participating in the exercise for the perils concerned (floods, coastal flooding and drought). The ACPR delivered the conclusions of this study in May 2021.

Summary map of the impact of floods.

EXPOSURE OF THE FRENCH ELECTRICITY NETWORK TO THE RISK OF FLOODING IN THE CURRENT CLIMATE AND BY 2050

Since October 2021, RTE has called on CCR, as part of the study on the exposure of electrical substations and pylons to climate risks by 2050. The information provided by CCR will enable RTE to identify the structures most exposed to flooding by overflow, surface runoff and coastal flooding throughout metropolitan France. Prevention actions may be considered for the most at-risk infrastructures.

AGRICULTURE AND THE CHALLENGE OF CLIMATE CHANGE

Climate experts warn of the increased risk of territories facing extreme climate risks, especially drought. This peril leads to large-scale economic losses in agriculture, such as the drought of 2003, which caused €4 billion in damages in France. A better understanding of these extreme events in terms of intensity, frequency by 2050 and impact on agriculture is needed to inform the thought process on the evolution of risk management systems in agriculture. CCR has developed a model to assess crop losses for cereals and grasslands due to drought and excess water hazards based on a meteorological index.

The frequency of extreme droughts (such as the one of 2003) would double by 2050. The water deficit would increase over the entire territory as shown below. This would come with an increase in 10-year crop losses of 35% for grassland, from 75% for soft winter wheat and from 79% for winter barley on a national scale.

Change in the intensity of 10-year extreme droughts measured by the increase in the water balance anomaly (%) between the current climate and future climate (2050) due to climate change according to IPCC scenario 8.5 and consequences on crop losses for grassland, soft winter wheat and winter barley.

Today, the issue of risk management in agriculture and the link of the various tools available to farmers is at a core concern for the various players in the field: the French State (via the Ministry of Agriculture and Food and the Ministry of the Economy, Finance and Recovery), insurers, reinsurers, agricultural unions and professional agricultural organisations.

As a continuation of the work initiated in 2020 by his predecessor, Julien Denormandie, the French Minister of Agriculture and Food, launched the Varenne agricole de l’eau et de l’adaptation au changement climatique on 28 May 2021. This Varenne is structured into three themes. The first one consists in providing French agriculture with tools to forecast and protect agriculture as part of the general policy for the management of climate-related hazards. Frédéric Descrozailles, a French Deputy, was appointed to chair this theme. The challenge is to design a better link between the different tools, with the National Fund for Risk Management in Agriculture (FNGRA) and the Comprehensive Climate Crop Insurance (MRC), with the aim of better protecting farms.

As an essential link in the State’s risk management system, CCR took part in these discussions to provide figures on the exposure of crop production to climate risks, as well as on the analysis of agricultural risk management scenarios (changes in premiums, insured portfolio, etc.). Since 2017, the French Ministry of Agriculture and Food has entrusted CCR with the task of monitoring comprehensive climate insurance for crop production in France.

CCR has compiled a geographical database and is developing indicators that measure the developments of this insurance product on various scales. The analyses are published in the form of a summary note on the Ministry’s website for each campaign.

The bill tabled by the Government on 1 December 2021 was enacted on 2 March 2022. This reform aims to introduce a three-tiered risk management system: small losses borne by individual farmers, intermediate losses borne by insurance and extreme losses borne by the nation as a whole. The coverage via national solidarity will differ depending on whether the farmer has taken out MRC insurance or not. The aim is to increase the take-up rate of insurance: 60% for arable crops and viticulture (today it is c.30%), and 30% for grassland and arboriculture (today it is lower than 5%).

“2021 MARKS THE YEAR IN WHICH THE FRENCH LEGISLATOR RECOGNISED THE ROLE OF CCR FOR STATE-RELATED PREVENTION.”

THIERRY COHIGNAC,

Deputy Chief Underwriting Officer, Public Reinsurance and Guaranty Funds

PREVENTION OF NATURAL RISKS

CONSOLIDATION AND SUSTAINABLE ANCHORING OF CCR’S BUSINESS

In view of the foreseeable increase in the number of natural catastrophes in the coming decades, prevention remains one of the main catalysts. The sustainability of the natural catastrophe compensation scheme in its current form is partly dependent on this. With its central role in strengthening the Nat Cat regime, CCR has been developing an activity for several years aimed at promoting prevention dynamics on the national territory. 2021 was a pivotal year during which CCR consolidated and anchored its work in natural catastrophe prevention.

PREVENTION SUPPORT TO THE FRENCH PUBLIC AUTHORITIES: NEW MISSIONS FOR CCR

2021 marks the year in which the French legislator recognised the role of CCR for State-related prevention. Article 8 of the Law of 28 December 2021 on compensation for natural disasters provides that: “the Caisse Centrale de Réassurance carries out, at the request of the ministers responsible for the economy, ecology and public accounts, studies on prevention policy [...]”.

This formalization of CCR’s role as a player in natural catastrophe prevention found its concrete expression in 2021 through the signing of a partnership agreement with the General Directorate for Risk Prevention of the Ministry of Ecological Transition and the General Directorate of the Treasury of the Ministry of the Economy, Finance and Recovery. This five-year agreement provides for the implementation of a working partnership between CCR and the central and decentralised State departments in charge of natural risk prevention.

Its objective is to make CCR’s expertise available to State departments for decision-making purposes. More specifically, CCR aims to provide insights into the prioritisation of public prevention schemes, the assessment of their effectiveness and the structuring of new schemes (through cost/benefit analyses). The work programme of the convention is defined annually. In 2021 the work carried out by thus CCR enabled:

- The production of a report on human exposure to natural disasters at the level of French communes;

- The assessment of the exposure of territories to natural disasters in areas relevant to prevention (river basin districts, local flood risk management strategies, flood prevention action programmes, public establishments of inter-municipal cooperation with their own tax system);

- The analysis of the relevance of the sums committed under the Major Natural Risk Prevention Fund (FPRNM) and its co-financing;

- The cost/benefit analysis of the implementation of a cyclone regulation in Reunion Island;

- The analyses allowing the prioritisation of the runoff risk prevention policy and the Risk Prevention Plans (PPR - Plans de prévention des risques).

In addition to this work shared with various State services, CCR published a report in 2021 on the implementation of the Major Natural Risk Prevention Fund (FPRNM) for each French region. Fourteen regional reports, produced in collaboration with the State, constitute the regional version of the national report produced in 2020. The aim of this work was to report on the achievements of the FPRNM since its creation. They also intend to put into perspective one of the main aspects of the natural risk prevention policy with regard to the territory’s exposure, of past and future disasters. The final objective is to provide quantified information, making it possible to objectively assess the relevance of the orientations taken in terms of natural risk prevention.

Alongside this work to support State departments, CCR continued its ad hoc activity to support local authorities wanting to benefit from CCR’s expertise in terms of territorial exposure or claims experience. Agreements have been signed with the Établissement public territorial de bassin de la Vilaine, the Syndicat des bassins versants Cailly-Aubette-Robec and Arche Agglo.

Coastal flooding waves in the bay in Saint-Malo during the tide of the century.

CCR ENCOURAGES AND SUPPORTS ITS CEDING COMPANIES IN NATURAL DISASTER PREVENTION

To reinforce prevention within the insurance profession, CCR set up a commission system in 2020 to encourage the implementation of actions listed in best practice guidelines. Introduced by the reinsurance framework, this commission is determined for each insurer according to its prevention efforts. Initiated in collaboration with the insurance industry, the best practice guidelines are intended to evolve every year.

In 2021, the total amount paid out by CCR for this fixed commission was €15.4 million. The outcome of this first year show the profession’s strong involvement in the field of prevention. The size, specialisation and level of exposure of insurers are important factors that explain the level of involvement, although this does not prevent medium-sized players from being relatively mature in this field.

“CCR WINNER OF THE AMITER COMPETITION”

NICOLAS BAUDUCEAU,

Head of the Public Funds and Prevention Division – Reinsurance and Public Funds Division

In terms of internal organisation, the structuring dynamic is strong. More than half of the ceding companies already have internal organisations that allow them to implement prevention actions for their policyholders. In addition, three quarters of them are pursuing actions to step up their distribution network and their claims settlement service. There are many actions oriented for policyholders. They mainly involve the dissemination of general information to policyholders, the implementation of vulnerability assessments (mostly for professional property), the dissemination of alerts in the event of imminent events, and postdisaster advice. In addition to granting the commission, CCR supports its ceding companies by providing them with resources and informing them about public schemes enabling their policyholders to benefit from financial support to reduce their vulnerability to natural disasters.

A BUSINESS THAT IS DIVERSIFYING: PARTICIPATION IN THE AMITER COMPETITION

In the summer of 2021, CCR participated in the idea competition “Better planning for changing territories exposed to natural risks” (AMITER), launched by the French Ministry of Ecological Transition. In association with a diverse team of architects and urban planners, CCR provided its expertise to structure a urban renewal project for the city of Montereau-Fault-Yonne that is compatible with the flood risk. On 14 December 2021, Barbara Pompili, the French Minister of Ecological Transition, awarded the CCR team the national grand prize 0f the competition, thus illustrating the added value of sharing CCR’s expertise in natural disaster prevention.

MANAGEMENT OF PUBLIC FUNDS

AN ADDITIONAL SOURCE OF EXPERTISE

In 2021, CCR was responsible for the accounting and financial management of five public funds on behalf of the State.

- The National Fund for Risk Management in Agriculture (FNGRA). A lot of work initiated by the government on the reform of crop insurance and the FNGRA was carried out during the year in consultation with various stakeholders. In the current context of Covidrelated economic and health crisis, tensions in the market for financial guarantees covering Travel and Tour Operators (TTOs) led the State to set up a Public Reinsurance Fund of financial guarantors. It is intended to enable the insurers and tourism trade associations concerned to renew their commitments to the TTOs through This work led to a bill that aims to thoroughly reform the articulation and management of the two systems.

- The Construction Insurance Risk Compensation Fund (FCAC)

- The Major Natural Risk Prevention Fund (FPRNM). In accordance with the French Finance Act for 2021 introducing the budgeting of the FPRNM, CCR returned the assets of the fund to the State budget during 2021.

- The Guarantee Fund for risk related to the spreading of urban or industrial sewage sludge on agricultural land (FGRE)

- The Guarantee Fund for losses arising from preventive, diagnostic and healthcare services provided by healthcare professionals (FAPDS). For this fund, CCR is also in charge of the administrative management of the files.

PUBLIC REINSURANCE FUND

THE TRAVEL AND TOUR OPERATORS’ GUARANTEE FUND (TTO FUND)

In the current context of Covidrelated economic and health crisis, tensions in the market for financial guarantees covering Travel and Tour Operators (TTOs) led the State to set up a Public Reinsurance Fund of financial guarantors. It is intended to enable the insurers and tourism trade associations concerned to renew their commitments to the TTOs through This work led to a bill that aims to thoroughly reform the articulation and management of the two systems. - The Construction Insurance Risk Compensation Fund (FCAC) - The Major Natural Risk Prevention Fund (FPRNM). In accordance with the French Finance Act for 2021 introducing the budgeting of the FPRNM, CCR returned the assets of the fund to the State budget during 2021. the reinsurance capacity provided by the Fund. In accordance with the French Code of Tourism, Travel and Tour Operators are under the legal obligation to have a financial guarantee to carry out their business.

Introduced by the 2022 Finance Act, the TTO Fund is to operate on a mechanism similar to public reinsurance with a disposal rate of 75% and management fees of 35%. The Fund will be allowed to cover a maximum final loss of EUR 1.5 billion. - The Guarantee Fund for risk related to the spreading of urban or industrial sewage sludge on agricultural land (FGRE) - The Guarantee Fund for losses arising from preventive, diagnostic and healthcare services provided by healthcare professionals (FAPDS). For this fund, CCR is also in charge of the administrative management of the files./ The scheme will come into force in Q1 2022 for a limited period of time. Already 90% of eligible players (in terms of market share) have signed up to the scheme. As provided for by law, CCR will be responsible for the accounting, administrative and financial management of the new fund.

TERRORISM

A VAST COVERAGE

In France, the coverage of terrorism risks in P&C insurance is very broad. Coverage for terror attacks and acts of terrorism has been mandatory under property insurance policies since 1986.

In view of the stakes and the limited capacities of private reinsurers, CCR is authorised by Article L.431-10 of the French Code of Insurance to provide unlimited reinsurance with a State guarantee for damage covered by the compulsory guarantee. This reinsurance system has been organised around two different covers: small and medium risks (risks below €20 million) and major risks (risks above €20 million). Coverage of major risks is provided through the coreinsurance pool, GAREAT (Gestion de l’Assurance et de la Réassurance des Risques Attentats et actes de Terrorisme), for which membership is compulsory for any insurer which is a member of France Assureurs.

In 2021, the reinsurance coverage of major risks was renewed for the next four years.

From 2022 onwards, CCR will reinsure GAREAT Major Risks with a State guarantee for events above a threshold set at €2.8 billion. This threshold will stay the same for the next four years. The pricing of this treaty has been revised accordingly: the premium received by CCR will be calculated on the GAREAT premium base. Minimum and maximum premiums were set, as well as an evolving premium rate over the next four years. The coverage of small and medium risks remains unchanged.

€2.8 BN

This is the threshold set, from 2022, above which the State guarantee would kick in.

NUCLEAR

STRENGTHENING THE PROTECTION OF VICTIMS

The specific nature and extent of the damage that can result from a nuclear accident have led a number of Western European countries to draw up international conventions on the third-party liability of nuclear operators, to which France is a party.

These conventions describe the rules that signatory countries must follow in compensating victims of nuclear accidents. In 2004, the Paris Convention evolved significantly to strengthen the protection of victims. Specifically, the financial guarantee required of nuclear operators was increased from EUR 91 to 700 million and the limitation period for personal injury was extended from 10 to 30 years. For lack of ratification of this revised convention by all the signatory countries, all the new provisions were not yet in force in France (the financial guarantee was increased to €700 million under the Energy Transition Act passed in 2016, but the limitation period was still 10 years). It was not until the end of 2021 that all signatory countries ratified the 2004 protocol, thereby bringing it into force in France.

The extension of the limitation period from 10 to 30 years, resulting from the new provisions of the Paris Convention, is causing coverage issues for the insurance market in most of the countries involved.

It is in this context that the French Finance Act for 2022 modified the State guarantee granted to CCR to cover nuclear risks. This guarantee is limited to a maximum of €700 million per nuclear plant and may not cover, for each reinsurance transaction, more than 60% of the total risk covered by the insurance or financial guarantee.

Discussions were initiated with market players covering the third-party liability of nuclear operators, in particular the French co-reinsurance pool called Assuratome, to make up for the market’s lack of coverage of personal injury declared between 10 and 30 years after a nuclear event. The events that would be covered by CCR in 2022 are actual accidents as well as possible injuries that may result from authorised discharges. The term “authorised discharges” means the release of radioactive substances outside the nuclear facilities that are necessary for their effective operation. To measure its exposure, both in terms of actual accidents and authorised discharges, CCR undertook work to assess personal injury claims. As operators have six months to implement these new provisions, intervention will only start as of 1 July 2022.