Revenues of millions of French companies have slumped, or been reduced to zero since March. The number of bankruptcies is going to explode by 21% this year. The unemployment rate is expected to reach 13,7% at the end of 2020, a figure not seen since the 1929 crisis.
Yet one French company out of two is insured against “business interruption losses”. These losses are insurable, contrary to what the insurance companies have stated. Concerning the current crisis, a study lead by the French Autorité de Contrôle Prudentiel et de Résolution (Prudential Supervision and Resolution Authority – ACPR) indicates, however, that only 7% of the insured companies would be guaranteed in a certain way or to be settled by the judge.
It is not possible to be satisfied with this situation while, at the same time, some insurers have confirmed the payment of a dividend in 2020, or even the same dividend as in 2019. Today only a solution with immediate effect would be effective for companies.
Insurance companies have so far disbursed 1.75 billion euros and promised another 1.5 billion in investments.
It took a public dispute between insurers for the ACPR to launch an investigation on 6 May into guarantees for professional insurance contracts. The movement is worldwide: its British counterpart, the Financial Conduct Authority (FCA), has decided to take examples of representative disputed contracts to court in order to dispel the uncertainty surrounding the drafting of certain contracts that are too unclear. In the United States, France and Great Britain, a dozen class actions representing thousands of businesses have been brought against their insurers to obtain compensation for their operating losses.
The “Husson” law, adopted by the Senate, contains the essential foundations for the work we are proposing. In the National Assembly, the majority representative Valéria Faure-Mutian proposes to create a new insurance system… but explains that it will take “years” to balance this system: it will be too late for all the companies that now risk bankruptcy.
“A new tax on insurers is not a solution to this crisis”
Insurers must take responsibility. The state must help them and precede them. We propose that a simple mechanism be created to guarantee business interruption losses in the event of a pandemic, based on the natural disasters one. It would be applicable, exceptionally, to the consequences of the current pandemic; the claims thus paid would be reinsured by the State, in the form of an advance, reimbursed by the contributions of the future guarantee mechanism. The insurers would assume, for this crisis, only the management costs: this is their job, an opportunity for them to demonstrate their social utility for French companies.
Calendar. The time to act on behalf of business is now, not after the next election. Parliamentarians from all sides have proposed the creation of taxes to finance the impact of Covid-19. All refused by the Ministry of Finance, who wanted in return an agreement to compensate part of the business interruption losses. The ultimatum set by the French minister of finance, Bruno Le Maire, to insurers on 14 May did not produce any effect.
We therefore propose the following calendar: in July, a final vote on the law establishing the systematic guarantee of companies against pandemics, applicable to the current crisis; in August, a declaration of claims by all companies to their insurer; in September, provisional compensation; in December, an investigation of the cases by the insurers and payment of the final compensation to the companies.
A new tax on insurers is not a solution to this crisis. The criteria for valuing their financial assets must be reviewed soon; their solvency rules must be reviewed by 2022. The State must be able to respond favorably to this request, in return for an immediate and clear response to the guarantee of companies’ operating losses.
Julien Auber is an opposition MP (LR) of Vaucluse, Olivier Marleix is an opposition MP (LR) of Eure-et-Loir, and Jérôme Goy is a lawyer at the Paris Bar, former COO of Aon Professional Services.