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Premium volume rises in France

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PARIS—Growth in French commercial insurance premiums lagged in 2006 because of tough rate competition, according to the French insurers' association.

Premium volumes for large enterprise risks--particularly industrial risks--fell 2.5% in 2006 compared with 2005. This was primarily caused by intense rate competition but also stemmed from a reduction in claims from the previous year, according to the Federation Française des Societes d'Assurances.

The federation estimated that overall commercial premiums grew 2.8%, including 8.1% growth for civil liability premiums. Premium volume was flat for automobile and rose 1.6% for property, as intense rate competition held down revenue growth in this sector.

However French insurers reported growth in overall estimated property/casualty and life premium volume of 12.8% last year-- their best performance in a decade--to a record e198.4 billion ($261.63 billion).

This followed an 11.0% gain in 2005 and was largely driven by a 16.1% increase in premiums for personal lines coverage, including life, health and bodily injury, accounting for e155.6 billion ($205.19 billion), the FFSA said.

"It was a very positive year, but the news wasn't all good" for insurers, said FFSA President Gerard de la Martiniere at a Jan. 30 press conference to release estimates for 2006.

Tough competition

He said tough rate competition for automotive and business coverage contributed to a continued slowdown since 2002 in premium growth for property and liability coverage.

Key concerns included rapidly increasing liability claims, particularly for automobile accidents, as well as controversy over medical liability premiums. In December, insurers opposed the government's proposed reform of the natural catastrophe insurance system.

Casualty premiums rose an estimated 2.2% to e42.8 billion ($56.44 billion) in 2006, mainly based on an increase in insured assets. The growth rate was down, however, from the 3.3% rise in 2005, 4.3% in 2004, 6.9% in 2003 and 7.4% in 2002, according to the FFSA.

But at the same time, Mr. de la Martiniere warned, there has been a very significant increase in the cost of accidents "that is difficult for the reinsurance and insurance industries to support." He said there were an estimated 23,000 bodily injury court cases, up 9.5% in 2006. "The French market has simply gone off the tracks," he said.

Insurance for construction risks saw a significant upswing--14.0% --benefiting from strong growth in France's building industry, he said. Mr. de la Martiniere urged the government to be cautious in its proposed overhaul of the so-called Cat-Nat regime--France's natural disaster pool--which has been delayed until after the upcoming presidential elections, slated to begin in April.

"We are against major changes to this regime, which plays a stabilizing role in big disasters. Since 1982, it has paid out some e10.8 billion ($14.26 billion) in claims," he said. He added, however, "FFSA does believe that Cat-Nat compensation for drought damage needs to be re-examined." The reform bill was inspired by a series of costly droughts that imposed large payments on the pool.