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New Caledonia: The Minister of the Economy to meet insurers next week
The New Caledonian Chamber of Commerce and Industry already puts the cost of riots in the archipelago at 200 million euros. The problem is that insurers have reduced their levels of cover for this type of risk, and some may invoke “civil war” as a reason not to compensate their clients.
The tense situation in New Caledonia has a high human cost, with five deaths recorded since the start of the uprising against electoral reform. It also has a considerable economic cost for the Indian Ocean archipelago, whose economy is already fragile.
The first three nights of rioting have already caused 200 million euros worth of damage, estimated the President of New Caledonia’s Chamber of Commerce and Industry (CCI) on Thursday. This represents 2 points of the local annual GDP. This estimate is based on “the cost of construction, stock and operation”, David Guyenne told AFP, following a meeting with the New Caledonian government.
Allianz highly exposed
It’s still too early for a definitive figure, and the bill is likely to climb even higher. The situation “remains very tense, with looting, riots, fires and assaults”, declared Prime Minister Gabriel Attal, the day after the start of the state of emergency in the archipelago.
Economy Minister Bruno Le Maire will convene a meeting of insurers next week “to guarantee rapid and fair compensation for the economic world”, Bercy announced on Friday morning.
Insurance companies are already on alert. Allianz France, in particular, says it has “50,000 individual, professional and business customers” in New Caledonia. This is a significant number, given the territory’s population of 269,000 (90,000 households) and 52,000 businesses.
“The facts observed on the spot seem to be more or less of the same nature as those observed during last summer’s riots, which led to significant damage for the communities concerned and their respective insurers”, explains Maif, which nevertheless specifies that it has ‘no exposure to the current risks’.
Its subsidiary Smacl, the leading insurer of local authorities, suffered heavy losses in 2023 after finding itself in the front line during the urban riots following the death of young Nahel, killed by a policeman. Fires and damage to town halls, schools and other communal centers cost the sector 200 million euros, out of the 793 million euros in damage incurred by the entire profession, according to the France Assureurs federation.
Faced with the shortage of insurance in the local public sector market, “the big unknown is the degree of coverage of New Caledonian local authorities”, points out Romain Dupeyré, a lawyer at DWF.
Tougher conditions after the riots of 2023
The situation also echoes the recent recommendations of the Chrétien-Dagès mission and the Senate Finance Committee. Both called for the creation of a public insurance scheme for riot-related damage to communities, inspired by the natural disaster compensation system.
For all policyholders in New Caledonia, whether individuals, companies or local authorities (the State being its own insurer), “the riot and civil unrest cover provided under most property damage policies will apply, as it did last summer,” asserts Jérôme Goy, a lawyer at Enthémis. On the other hand, coverage has often been reduced and deductibles increased over the past two years”. This can result in out-of-pocket expenses of between 500,000 and one million euros per claim.
“This is a consequence of the Gilets jaunes movement and last summer’s riots, but also of the hardening of the business insurance market since 2019”, the lawyer continues. A “hardening” that translates into higher rates and lower levels of coverage for businesses.
The grey area of “civil war
It remains to be seen how insurers will describe the crisis in New Caledonia. “We’re heading straight into a civil war”, declared Louis Le Franc, French High Commissioner to New Caledonia, on Wednesday. However, in insurance law, wars are generally excluded from contracts.
“The fact that a government representative uses the term ‘civil war’ creates a grey area,” says Romain Dupeyré. Insurers could be tempted to invoke this cause to refuse to indemnify a customer, since civil wars are less frequently covered than riots, popular movements and vandalism.”
There is, however, a difference in treatment between foreign wars and civil wars. In the first case, the insured must prove that the damage he or she has suffered was not caused by a war with another state, in order to receive compensation,” explains Jérôme Goy. In the second case, it’s up to the insurer to prove that the damage is the consequence of a war between citizens of the same State [in order not to indemnify, if civil war cover is not included in the policy]. In principle, this is a more complicated situation for the insurer, who bears the burden of proof”.