On 18 June 2015, the European Commission issued a reasoned opinion inviting France to amend its insurance law which discriminates against insurance companies established in other Member States. A formal notice was sent to France in July 2014.

In France, an Insurance Guarantee Fund (Fond de garantie des assurances obligatoires de dommages -FGAO) has been created to cover damages in cases of insolvent insurers in the field of compulsory insurance.

However, the FGAO denies cover for insurance companies established outside France which provide insurance services in France, although this activity is allowed within the framework of the free provision of services across the EU.

FGAO’s position is based on the fact that:

  • Such insurers depend on the external control of an authority whose assessment of solvency may differ from rules applicable in France.
  • Such insurers are not familiar with compulsory insurances in French construction law.

By means of such provisions under French law, construction companies are indirectly obliged to take out policies with insurers established in France, notably if they want to bid for public contracts.

Pursuant to the European Commission, this situation constitutes an infringement of the freedom of establishment in the EU (article 49 and 56 of the Treaty of Functioning of the EU). It has requested France to notify measures taken to remedy this situation within two months. Otherwise, France faces sanctions from the EU Court of Justice.