France’s climate adaption plan ‘stops halfway’

The French government has warned that insurance costs could skyrocket by 35% if nothing is done to adapt to climate change, as it presented its plan to prepare for a warming world that critics say provides insufficient funding to cover the costs.

Climate disaster costs could double by 2050, reaching €143bn, the government said in its climate adaptation plan released earlier this month.

France’s plan includes 52 measures which aim to prepare both economic and social sectors for a possible warming scenario of over 4°C in France by the end of the century. The measures cover everything from housing resilience to modernising the insurance system and integrating adaptation of climate change into corporate strategies, to mobilising private financing for the energy transition.

The adaptation was welcomed by policy experts but criticised for not being ambitious enough as it allocated very little funding for the necessary measures.

Jérôme Crugnola-Humbert, a sustainable finance expert and independent consultant, said that while the plan covered many aspects of society and covered long-term planning, “it kind of stops halfway and doesn’t take the hard political decisions of either raising more money or putting more constraints on companies, on individuals”.

One of the positive aspects of the plan is that it tries to take things a step further especially for insurance and climate risk, and stresses that the whole of society will need to do something to address climate change, he said.

“[France] already has in place [an insurance system] that works. So it’s not about implementing something from scratch. It’s more about safeguarding it against rising costs, through a mix of additional financing or risk prevention and climate adaptation.”

Increasing insurance costs due to climate change

Like other countries around the world, the insurance industry in France has faced increased costs due to extreme weather events, such as droughts, flooding and wildfires. While insurers have not withdrawn in those areas as they have in some US states, there is growing concern about the long-term feasibility of the current insurance system in France and the EU, with a growing insurance protection gap for natural disasters which is only getting worse with climate change.

Devastating flooding in the Spanish city of Valencia in October 2024 cost the country 0.2% of its GDP in the fourth quarter, while flooding in central Europe and Italy has led to billions in insurance losses.

As Europe grapples with the increasing reality of a warming world, governments have started to consider the role of insurance in helping finance and mitigate climate disasters. In Italy, every company is now required to buy climate insurance to protect assets from natural disasters, while the EU’s insurance regulator has recommended that insurers hold higher capital for their fossil fuel assets. The European Central Bank has recommended a two-pillar approach of public-private reinsurance to reduce the impact of climate disasters.

As climate change increases not only insurance premiums but also accelerates the length and duration of extreme weather events, society may need to make hard choices about who gets to live where. While new buildings in areas at risk can be banned, it becomes much more of an ethical dilemma in many large cities built around coastlines and large rivers, including in France.

Researchers at the Institute for Climate Economics (I4CE) have argued that the financial sector could take a bigger role in helping homeowners adapt to climate change, such as providing data and scenario analysis tools, engaging and raising awareness with clients, and conditioning financial services on adaptation.

“As financing climate adaptation moves up the political agenda in the EU, the mobilisation of banks and other financial institutions will require due consideration,” said Romain Hubert, a research fellow at I4CE.

While some economists have argued that insurance premiums should increase in order for homeowners to understand the risks, Crugnola-Humbert does not think the market should decide as it would lead to inequality and economic disaster, with contagion effects in the real estate and banking sectors, as well as fiscal and social disaster if governments need to pick up the bill after multiple climate disasters.

“It cannot be entirely left to the market and to individual insurers to decide, it’s a collective debate about what can be protected through prevention, and that’s what this French plan is about.”

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