AM Best is maintaining its Negative outlook on France’s non-life insurance sector, citing limited inflation-adjusted growth, pressure on margins, and increasing strain from climate-related and political risks.
From 2021 to 2025, non-life premium growth in France remained closely tied to modest GDP performance.
The IMF expects the French economy to grow by just 0.6% in 2025, with inflation averaging below the ECB’s 2% target, creating an unfavorable environment for strong insurance expansion.
While insurers continued raising rates in response to claims inflation, those increases failed to keep pace with rising loss costs, especially in the motor and property segments.
The market also faces structural challenges due to intensifying competition. Despite multiple rounds of price adjustments in recent years, technical margins remain under pressure.
France’s highly competitive environment restricts insurers’ ability to implement further substantial increases, especially when weighed against consumer tolerance for higher premiums.
AM Best also points to significant changes to the financing of the state-backed natural catastrophe reinsurance scheme, the CCR. A premium surcharge introduced in 2025 was intended to stabilize the scheme amid rising climate-related losses.
However, insurers are passing this surcharge to policyholders, and further rate hikes may be politically and commercially difficult to justify. This risks leaving certain regions, particularly those prone to natural catastrophes, increasingly exposed and potentially uninsurable.
In health insurance, cost pressures are accelerating. The ageing population, rising medical expenses, and shifting coverage obligations from the state to private insurers all threaten profitability.
Uncertainty surrounding new regulation and the possibility of additional taxes compound these risks, with significant rate increases likely required just to preserve current margins.
France’s ongoing political instability also weighs on sector outlook. The collapse of Prime Minister Barnier’s government in late 2024, mass protests in 2023, and potential for future unrest continue to create uncertainty for insurers.
Despite a stable regulatory framework aligned with EU norms, AM Best warns that geopolitical risks and weak fiscal dynamics may lead to future shocks.
While the planned Solvency II reforms by 2027 may ease capital requirements for insurers, they are unlikely to counterbalance the current structural and market pressures in the near term.
