LONDON--(BUSINESS WIRE)--The French insurance sector has returned to growth in 2013, although it continues to face a transitional period relating to government reforms and a challenging market environment, according to a new report from A.M. Best Co.

The report titled, “Growth on the Horizon for French Insurers Adapting to Change”, notes that in 2012, the insurance sector contracted as total premium decreased 4.6% to EUR 180.7 billion, according to data from the insurance association Fédération Française des Sociétés d’Assurances (FFSA). This drop came on top of a sharp 8.5% reduction in gross premiums in 2011. France’s decline in gross premium written reflects the challenging market conditions on the life side, as low interest rates prevailed and legislative changes resulted in less attractive product offerings for policyholders.

The insurance sector has shown signs of recovery in the first five months of 2013. Total premium rose 6.7%, reflecting an 8.8% increase in life and health insurance and a 2.5% rise in property/casualty (P/C) premium.

However, A.M. Best believes France’s insurance market remains competitive and challenging as insurers seek to utilise capital efficiently and shift towards higher margin business. Mahesh Mistry, director, analytics, said: “The prospects for insurers have improved in 2013, with non-life continuing to expand and life business showing a partial recovery. Nevertheless, French insurers face a challenging operating environment as they seek to optimise capital efficiency and further diversify their product portfolios.”

The report examines the life sector, which is almost three times the size of the non-life market, and how it has been impacted negatively by strong competition from other banking products. It discusses the strong presence of mutual insurers, and the sector’s concerns regarding changes to health legislation and Solvency II.

The report also examines the French government’s legislation to reform the natural catastrophe insurance system, known as Régime Cat Nat (Nat Cat scheme), which is designed to protect against specific perils. Currently, a Nat Cat flat percentage surcharge for natural catastrophe risks applies to all property contracts, regardless of the property insured. Yvette Essen, director, industry research - Europe and emerging markets, and report author, added: “While this flat rate enables affordable protection, A.M. Best considers there to be little incentive to take risk mitigation and prevention measures to reduce severity of losses – an area the new legislation is likely to address.”

To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=217146.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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