Every answer and its explanation appears here once you have finished the path. Each one then links to the matching glossary entry, where the concept is set out in full with its worked example.
1. The CatNat surcharge is flat: an owner in a Loire flood zone pays the same rate as a mountain owner with no flood exposure. What does that choice buy, and what does it cost?
It buys universal access through cross-subsidy between zones, and costs every price incentive to prevent
The scheme, created by the law of 13 July 1982, extends every property policy by operation of law to catastrophes recognized by ministerial order. It explicitly targets risks the private sector alone would judge uninsurable: floods, drought-related subsidence, mudslides, earthquakes. The flat rate is a deliberate solidarity choice rather than a simplification: it makes the unexposed zone pay for the exposed one, and that is what keeps insurance available everywhere. The counterpart is exactly symmetric and structural: an identical rate everywhere sends no price signal, therefore no incentive to prevent, neither for the owner nor for the municipality. This is the criticism that returns at every review of the scheme, and it cannot be fixed without giving up what the scheme buys.
Glossary entry · regime-catnat2. The surcharge rose from 12 percent to 20 percent on 1 January 2025, the first increase since 1999. What made it necessary?
A technical deficit from 2016 onward, and reserves down 46 percent between 2015 and 2022
The scheme ran a technical deficit from 2016 and its reserves fell 46 percent between 2015 and 2022, which led to the rate increase, from which the Treasury expects an additional 1.5 billion euros in annual receipts. The point to retain goes beyond the figures: a flat rate financing a peril whose burden grows is a rate that cannot adjust on its own. It does not track claims the way a market price would, it is raised by decision, late and in one step. Twenty-six years separate the two adjustments, and the state's unlimited guarantee is precisely what allows the wait to last that long without anything visibly breaking.
Glossary entry · regime-catnat3. An insured suffers flood damage, but their municipality is not named in the interministerial order. What can they obtain under the scheme?
Nothing under the scheme: the order is the condition that triggers the cover
The cover extends by operation of law to every property policy, but only for catastrophes recognized by order. Without an order the CatNat cover does not apply, and the insured falls back on ordinary cover, which usually excludes these perils. The consequence is distinctive and worth seeing: the trigger is not the physical event but an administrative decision, which explains why a municipality's recognition, and still more its refusal, are contested. Once the order is issued, the insurer indemnifies on the basis of the property's prior condition, with a statutory deductible of 380 euros for individuals, and may then reinsure with the Caisse centrale de réassurance, state-owned and backed by its unlimited guarantee.
Glossary entry · regime-catnat4. How does clay shrink-swell subsidence differ from every other peril the scheme covers?
It arises from an alternation of soil shrinkage and swelling, with no dated event and no damage visible on the day
In drought the clay contracts, when the rain returns it swells, and those differential movements crack foundations, especially those of detached houses on sensitive soils. None of that produces an event in the sense the other perils do: no date, no damage observable on the day, a deterioration that surfaces months later. Yet the peril is covered by the scheme as soon as an order recognizes a state of geotechnical drought catastrophe, which forces a slow process into a mechanism designed for events. Climate change, by intensifying the alternation of droughts and rainfall, makes it structurally worse, and it has become one of the scheme's fastest-growing and costliest items: a so-called secondary peril turned major burden.
Glossary entry · regime-catnat-secheresse5. Between 2012 and 2022, Swiss Re estimates that so-called secondary perils accounted for 70 percent of global insured natural catastrophe losses. What does that figure defeat?
Classic catastrophe models, built for primary perils whose frequency can be modeled and whose historical series remain representative
Secondary perils are more frequent and individually less severe: convective storms with hail, tornadoes and straight-line winds, pluvial and fluvial floods, wildfires, landslides, droughts, heatwaves. The term is relative, since a hurricane is the primary peril whose induced coastal flooding and landslides are the secondary ones. Three things make them resistant to classic models, and they compound: their frequency models poorly, their spatial distribution is less concentrated, and their non-stationary trend invalidates the historical series those models rest on. That 70 percent share also owes something to better insurance penetration in wildfire and convective storm regions, which takes nothing away from the modeling problem.
Glossary entry · peril-secondaire6. In 2023, central European hailstorms produced nearly 8 billion euros of insured damage with no single event exceeding one billion. Which protection does that shape of loss put under strain?
Annual aggregate excess of loss programs, saturated by the accumulation of dozens of moderate events
A per-event structure never attaches if no event reaches the retention, which is exactly the case here: dozens of storms between April and September, none above one billion, and yet nearly eight billion of loss. The protection that absorbs this is the annual aggregate excess of loss, which looks at the year's cumulative total, and that is what the 2023 season saturated. The practical difference from a primary peril lies there: a hurricane tests the catastrophe layer once, a storm season empties the annual aggregate without ever reaching the high layer. That shift is what put secondary perils at the center of reinsurance portfolio reviews.
Glossary entry · peril-secondaire7. An insurer finds that its historical series poorly describe the future exposure of its coastal book. What is that difficulty called, and what must replace them?
Non-stationarity, which forces a shift to forward-looking, scenario-based approaches
Physical climate risk reads on two registers: acute risks, extreme events whose frequency and intensity are rising, and chronic risks, long trends such as sea level rise or shifting precipitation regimes. For an insurer it has two faces, a risk borne that shows up in claims, and an asset risk, since a building in a flood zone or a loan book exposed to rising seas loses value. And the central actuarial difficulty is non-stationarity: past data no longer describe a future whose parameters are moving, which rules out calibrating on history and forces scenarios. The TCFD framework standardized reporting on both registers, and EIOPA brought climate stress testing into prudential supervision.
Glossary entry · risque-climatique-physique8. Assessing a geotechnical drought claim is slow and contested. A parametric trigger would solve the delay. What would it install in exchange?
Basis risk: the index may fail to cross the threshold while the house is cracked, and the reverse
Parametric cover pays as soon as a physical index crosses a defined threshold, with no assessment and no supporting documents: settlement in days rather than months, no adjustment cost, and low moral hazard since the insured cannot act on a physical index, which disqualifies the option that stops at the attachment point while making it plausible. The price of that speed is basis risk, and it cuts both ways: a cracked house without a threshold crossing receives nothing, a threshold crossed without damage triggers a payment. On a peril where the link between the climate index and the crack depends on soil type and foundations, that gap is particularly wide. The mechanism is proven elsewhere, notably to cover states against cyclones or earthquakes, and it serves as the trigger for some catastrophe bonds.
Glossary entry · assurance-parametrique9. A municipality sees its exposure grow faster than its prevention. The scheme still indemnifies, since cover applies by operation of law. Where does the limit lie?
In the balance of the scheme itself, whose flat rate sends no prevention signal and is raised by decision when the burden grows
The adaptation gap widens where exposure grows faster than prevention and transfer capacity. In an ordinary market the price signals it before any political decision: the premium rises, and that rise tells owner and community alike that the risk has changed. A flat-rate scheme has no such signal, by construction: the rate is the same everywhere and does not move when local exposure moves. Adjustment therefore happens elsewhere, nationally, late and in one step, as in January 2025. The limit is not solvency, which the state's unlimited guarantee covers, it is the balance of the mechanism and the question of who funds a growing exposure. Prevention there depends on public policy rather than on price, and that is the direct consequence of the 1982 choice.
Glossary entry · ecart-adaptation-climatique