Climate Risks and Insurance: Why Adaptation Is Becoming a Condition for Business Insurability

Introduction

The intensification of climate hazards is progressively transforming the relationship between businesses and insurance. Three legal principles structure this development: (i) a risk must be fortuitous to be insurable; (ii) an insurer may cancel a policy after a claim or an increase in risk; (iii) indemnification assumes that the insured has taken reasonable measures to prevent or mitigate damage. In a rapidly deteriorating climate context, these principles converge toward an operational conclusion: adaptation is becoming a condition for the insurability and indemnifiability of businesses.

1. Insurance only covers fortuitous events: a certain risk is not insurable

Legally, an insurance contract is based on the existence of fortuity, meaning an uncertain event (French Insurance Code, art. L121-15). This fundamental principle implies that a contract cannot cover a risk that has already materialized or whose occurrence is certain or inevitable (Dalloz Étudiant, 2023).

In a climate context, this principle takes on a particularly operational dimension for risk managers and chief financial officers. A hazard whose probability of occurrence increases rapidly to the point of becoming almost certain ceases, in practice, to be insurable. Repeated losses can thus transform a fortuitous event into actuarial near-certainty. The professional press emphasizes that certain areas exposed to flooding or submersion are becoming "de facto uninsurable," with insurers withdrawing when the probability of a claim becomes too high (Bonnardel, 2026; Rodier, 2025).

The Caisse Centrale de Réassurance reiterates that "a risk whose occurrence is no longer fortuitous but certain falls outside the scope of insurance" (CCR, 2025).

The increase in the frequency and predictability of climate hazards thus erodes the insurance fortuity itself, which is the economic and legal foundation of insurance.

2. Repeated losses and increase in risk: the insurer's right to terminate

One of the main challenges facing the insurance model is the growing selection of risks, accompanied by increases in deductibles, compensation caps and, in some cases, the disengagement of insurers from areas deemed too exposed (CCR, 2025).

French law explicitly recognizes the insurer's right to terminate a contract after a claim or an increase in risk. Article L113-4 of the French Insurance Code provides for termination in the event of an increase in risk, while Article R113-11 regulates termination after a claim. Institutional sources confirm that termination can occur even in the absence of fault by the insured, if this possibility is provided for in the contract (France Assureurs, 2024; Service-public, 2024).

In a climate context, the repetition of losses (floods, submersions, storms) constitutes precisely an increase in risk. Concrete cases of local authorities or exposed properties that have lost their insurance coverage after repeated claims have been documented in France (Golla, 2024).

The increasing frequency of climate events is thus progressively turning insurable risks into risks that are terminated or refused by the market.

3. Indemnification is not automatic: the insured's obligation of prevention

The natural disaster compensation scheme clearly illustrates the obligation of prevention incumbent upon the insured. Article L125-1 of the French Insurance Code provides that the natural disaster (Cat Nat) guarantee applies when the damage results from the abnormal intensity of a natural agent "when the standard measures to be taken to prevent this damage could not prevent its occurrence or could not be taken."

Indemnification therefore presupposes that the insured has implemented reasonable prevention measures. This condition is confirmed by public sources (Ministry of Ecological Transition, Géorisques) and by case law, which examines whether the damage would have occurred despite adequate measures (Cass. 2e civ., 10 Nov. 2021; Cass. 2e civ., 5 Mar. 2020; Boulanger, 2023).

Insurance is thus not intended to compensate for the absence of adaptation or risk management. Prevention and the reduction of vulnerability are becoming central conditions for indemnifiability.

4. Climate risks and corporate insurability: toward an adaptation requirement

Situations of uninsurability are already emerging in certain exposed territories or sectors. Several French local authorities have faced insurance refusals following repeated climate-related claims, with insurers pulling out when the frequency of events makes the risk almost certain (Golla, 2024; Bonnardel, 2026). At the same time, indemnification is not automatic: case law recalls that it presupposes that the insured has taken reasonable preventive measures (Cass. 2e civ., 10 Nov. 2021).

Finally, the increase in climate losses is leading to a tightening of insurance conditions: higher deductibles, coverage limits, and increasing exclusions of perils in multi-risk policies (Banque de France, 2024; France Assureurs, 2023; OECD, 2023). In summary:

·        climate change is gradually transforming fortuity into near-certainty and can render an asset uninsurable;

·        the frequency of claims allows for termination or denial of insurance coverage;

·        the absence of adaptation measures can limit indemnification.

For businesses, the consequence is structural. Insurability now depends on the ability to demonstrate that the damage remains accidental and that vulnerability reduction measures have been implemented. Insurance thus becomes an incentive mechanism for adaptation.

In certain exposed areas or sectors, the lack of adaptation can lead to a spiral of uninsurability: repeated claims → cancellation → inability to obtain insurance → asset depreciation → financing difficulties. Insurance and financial literature already refers to the emergence of "uninsurable" or "stranded" assets in climate-exposed territories (IPCC, 2022; OECD, 2023).

Conclusion

Insurance law is built on fortuity, prevention, and risk control. Climate change is placing these three cornerstones under strain. When a hazard becomes too frequent or predictable, insurability recedes; when claims recur, the insurer can terminate coverage; when prevention is insufficient, indemnification can be challenged.

In this context, the adaptation of businesses to climate risks is no longer merely an environmental or operational matter: it is becoming a legal and economic condition of insurance. In other words, to remain insurable and indemnifiable, companies must become adaptable.

Frequently Asked Questions

What is meant by the insurability of a climate risk?

A risk is insurable if it remains fortuitous, meaning uncertain (French Insurance Code, art. L121-15). When the repetition of losses makes an event virtually certain, it ceases in practice to be insurable: certain areas exposed to flooding or submersion are already deemed "de facto uninsurable."

Can an insurer cancel a policy after repeated climate-related claims?

Yes. The French Insurance Code provides for cancellation in the event of an increase in risk (art. L113-4) or following a claim (art. R113-11), including in the absence of fault by the insured if provided for by the contract. Local authorities have already lost their insurance coverage after repeated claims.

Does insurance automatically cover climate-related damage?

No. The natural disaster guarantee (art. L125-1) applies when standard preventive measures could not prevent the damage or could not be taken, and case law examines whether the damage would have occurred despite adequate measures. In addition, there are higher deductibles, coverage caps, and peril exclusions.

How can a business remain insurable in the face of climate risk?

It must be able to demonstrate that the damage remains accidental and that measures to reduce vulnerability have been implemented. Concretely: anticipate events to act before they occur (Protect sends alerts up to 5 days in advance), then quantify and prioritize adaptation measures (Horizon).

Insurability, deductibles, indemnification: where do your sites stand? Horizon quantifies the climate impact on each of your sites and identifies the most cost-effective adaptation measures; Protect alerts you up to 5 days in advance so you can act before the event occurs. Book a meeting with our experts.

References

Banque de France. (2024). Les conséquences du changement climatique pour le secteur de l’assurance. Bulletin de la Banque de France.

Bonnardel, M.-A. (2026). Crise de l’assurance : pourquoi certains territoires risquent de ne plus être assurables. L’Argus de l’assurance.

Boulanger, S. (2023). Catastrophes naturelles : l’assuré doit avoir pris des mesures habituelles pour prévenir les dommages. L’Argus de l’assurance.

CCR. (2025). Protéger l’assurabilité : un enjeu collectif. Observatoire de l’assurabilité, Caisse centrale de réassurance.

Code des assurances. Articles L121-15, L113-4, L125-1, R113-11.

Cour de cassation, 2e civ., 10 novembre 2021, n°20-16.316.
Cour de cassation, 2e civ., 5 mars 2020, n°19-10.288.

Dalloz Étudiant. (2023). Pas d’aléa, pas d’assurance.
https://actu.dalloz-etudiant.fr/a-la-une/article/pas-dalea-pas-dassurance/

France Assureurs. (2023). Assurance et changement climatique.

Golla, M. (2024). Face à l’augmentation des aléas climatiques, 1 000 à 2 000 collectivités locales se retrouvent sans assurance. Novethic.

IPCC. (2022). Climate Change 2022: Impacts, Adaptation and Vulnerability (AR6 WGII).

Ministère de la Transition écologique. La garantie catastrophes naturelles (Cat Nat). Géorisques.
https://www.georisques.gouv.fr

OECD. (2023). Climate-related financial risks in insurance.

Rodier, A. (2025). Pourra-t-on encore s’assurer demain ? Le Monde.