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What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?
Insurance contracts The rules governing insurance contracts (eg, obligations of the parties, contractual and pre-contractual information obligations, modalities of conclusion, amendments to and termination of the contract) are primarily laid down in Book I of the French Insurance Code. Most of these rules are mandatory; therefore, the parties to the insurance contract cannot derogate from these provisions.
In addition, the general contract law principles set out in the French Civil Code apply to insurance contracts in relation to matters which are not expressly governed by – or to the extent that they are not derogated from – the French Insurance Code (eg, default interest, civil liability arising from a breach of the duty to advise and information obligations, evidence of the contract and criminal infringement).
The French Consumer Code, the Commercial Code and the Monetary and Financial Code may also apply to insurance contracts, depending on the nature of the policyholder and the class of insurance.
Reinsurance contracts Reinsurance contracts are not subject to the French Insurance Code provisions on insurance contracts and neither the French Insurance Code nor any other law provides for specific rules or mandatory provisions applying to reinsurance contracts. Reinsurance contracts are therefore subject to the general contract law principles applicable to all contracts.
Are (re)insurance contracts subject to any mandatory/prohibited provisions?
Insurance contracts In principle, insurance contracts fall within the scope of contractual freedom of the parties; however, they are subject to rules which impose a specific formalism. For example, insurance policies must be in writing and exclusions, nullities and forfeitures must be in bold and extremely clear print. Further, mandatory information (eg, contact details of the parties, a description of the risk insured, duration of the cover, applicable law and the name and address of the regulatory body) must be included in contract.
Additional mandatory information may be required depending on the risks covered under the policy.
Reinsurance contracts In the absence of specific rules applying to reinsurance contracts, the provisions of such contracts must comply with those applicable to all contracts.
Numerous clauses are generally included in reinsurance contracts as part of best market practice; however, the amount depends on the complexity of the reinsurance contract. For example, longevity reinsurance contracts require more sophisticated clauses.
Can any terms by implied into (re)insurance contracts (eg, a duty of good faith)?
Insurance implied terms A number of the French Insurance Code provisions in relation to insurance contracts are deemed to be imperative (ie, parties are subject to such provisions regardless of those of the insurance contract). For example, the insured may not benefit from coverage if it voluntarily caused the harmful event covered under the insurance contract, irrespective of the provisions of the contract.
Reinsurance implied terms Although the French Insurance Code provides no specific regulations applicable to reinsurance contracts, such contracts remain subject to the general provisions and concepts applicable under French contract law. For example, reinsurance contracts must be entered into and executed in good faith.
What standard or common contractual terms are in use?
The French Prudential Supervision and Resolution Authority (ACPR) operates no prior control on the company or products to be distributed in France. However, French legislature has imposed the use of standard contractual clauses in certain insurance sectors, mostly with respect to mandatory insurance policies, such as those for motor liability or construction insurance. Professional liability insurance contracts are also subject to the provision of compulsory clauses.
Professional associations may recommend clauses to be included in insurance contracts. The French Federation of Insurance provides for standard clauses (eg, with respect to economic penalties) and even full terms and conditions for certain types of insurance (eg, marine and aviation insurance).
What is the state of development in your jurisdiction with regard to the use of ‘smart’ contracts (ie, blockchain based) for (re)insurance purposes? Are any other types of financial technology commonly used in the conclusion of (re)insurance contracts?
In France, ‘smart’ contracts are not yet legally defined or deemed to be technically and legally mature. A number of initiatives have been launched (eg, the Blockchain Insurance Industry Initiative B3i launched by (re)insurers and aimed at exploring the potential of distributed ledger technologies); however, these remain in the development phase and no blockchain-based ‘smart’ contracts are known to have been put into practice in the French market. The European Insurance and Occupational Pensions Authority recently stressed that it would closely monitor blockchain developments in the insurance industry and expects that blockchain will first be implemented in commercial lines and the reinsurance business. Insurtechs are developing in France.
What rules and procedures govern breach of contract (for both (re)insurer and insured)?
Consequences of breach by insurer The penalties applicable for breach of contractual provisions are provided directly in either the French Insurance Code or the insurance contract (in application of the code). Policyholders and insureds may introduce judicial proceedings to obtain payment of their claims and monetary compensation if and when they have suffered damage as a result of the contractual breach. This supposes that they can show the breach, the damage suffered and a causal link between both. If the breach is redundant, the ACPR may consider whether the insurer fails to comply with applicable regulations and impose disciplinary penalties for such breach.
Consequences of breach by insured The main types of breach that may be committed by the insured and the consequences of such are as follows:
- Non-payment of insurance premiums – in relation to non-life insurance contracts, after 10 days following the due date of the premium, the insurer must send the insured a formal notice to pay the premium within 30 days. After the expiry of such period, the insurer may suspend coverage and terminate the contract 10 days thereafter, if the premium has not been paid. No similar provision applies to life insurance contracts, which may be terminated under specific circumstances only.
- Failure to notify a loss within the period provided under the insurance contract – subject to express provisions in the insurance contract, the insurer may refuse to pay the benefits if it can show that the delayed declaration has caused it to suffer damage. This does not apply to life insurance contracts.
- Negligent or non-voluntary omission or misrepresentation modifying the risk or decreasing the risk assessment made by the insurer – if the insurer has knowledge of such an omission or misrepresentation:
- before the loss, it may either pursue the insurance contract after having increased the premium (if accepted by the insured) or send a registered letter to the insured to notify the termination of the contract within 10 days after such notice, and reimburse the insured the premium paid for the outstanding cover period; or
- after the loss, the insurance benefit will be reduced proportionally to the difference between the premium that has been paid and the premium that the insured would have paid, had it correctly declared the risk.
- Intentional or voluntary omission or misrepresentation modifying the risk or decreasing the risk assessment made by the insurer – the insurance contract is null and void, and (in relation to non-life insurance) the insurer can keep the premiums that have been paid and request payment of the premiums due.
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