Groupama Unveils World-First €120M Cat Bond to Combat Hail Risk

PARIS, France – January 13, 2026 – French insurance giant Groupama has launched a groundbreaking €120 million catastrophe bond, a financial instrument specifically designed to shield the company from the escalating costs of hail damage. The issuance, named Quercus II Re DAC, is the first of its kind on the Insurance-Linked Securities (ILS) market to be solely dedicated to hail risk and structured as an aggregate indemnity, marking a significant innovation in how insurers are confronting climate-driven perils.

Effective from January 1, 2026, the two-year bond will protect Groupama’s property and motor insurance portfolios across metropolitan France. The coverage is triggered if the insurer's total annual losses from hail events surpass a threshold of €470 million, transferring a portion of that extreme risk from its own balance sheet to capital market investors.

A Novel Defense Against a Growing Threat

The creation of such a specialized financial tool is a direct response to the alarming rise in the frequency and severity of severe convective storms (SCS) in France. Once considered a secondary peril, hail has become a primary driver of losses for the French insurance industry. The year 2022 stands as a stark reminder of this new reality, becoming the costliest year on record for hail-related damages. Insurers faced an estimated €6.4 billion in losses from over one million claims, a figure that dwarfed previous benchmarks and strained traditional reinsurance capacity.

Analysis from climate scientists and risk modelers indicates this is not an anomaly but part of a long-term trend. Hotter and drier weather patterns in Europe are contributing to more volatile atmospheric conditions conducive to the formation of large, destructive hailstones. Research from PartnerRe suggests that annual aggregated hail losses in France have effectively tripled since 1950, with climate change accounting for a significant portion of this increase. Unlike other major natural disasters, hail damage is typically not covered by France's state-backed natural catastrophe compensation scheme, leaving private insurers like Groupama to bear the full financial brunt. This exposure has made finding new, reliable sources of capital and risk transfer a strategic imperative.

The Mechanics of an Innovative Financial Shield

The Quercus II Re DAC bond represents a sophisticated evolution in risk management. Catastrophe bonds function by allowing an insurer (the sponsor) to transfer specific, high-impact risks to investors in the capital markets. Investors receive regular coupon payments for taking on the risk, but if a predefined catastrophic event occurs—in this case, annual hail losses exceeding €470 million—their principal investment is used to cover the insurer's claims.

What makes this bond particularly innovative is its aggregate indemnity structure. Rather than being triggered by a single, massive storm, the bond responds to the cumulative impact of all hail events throughout a calendar year. This is crucial for a peril like hail, which often manifests as a series of damaging, but not individually catastrophic, storms. The structure provides protection against a high frequency of mid-sized events that can collectively erode an insurer's profitability just as severely as a single mega-disaster.

The transaction was placed and structured by the specialist team at Aon Securities, which successfully attracted a broad base of investors specializing in this asset class. The bond's design offers a precisely tailored hedge, aligning the financial protection directly with Groupama's actual losses in its core property and motor businesses.

A Strategic Play in a Booming ILS Market

Groupama's move is not an isolated experiment but a calculated step within a broader strategy of diversifying its risk capital. The company has a history of using the ILS market to complement its traditional reinsurance programs, including a €150 million bond for French windstorm risk. This latest issuance deepens that relationship and demonstrates a commitment to leveraging capital markets for highly specific threats.

« This issuance, a world first, demonstrates the group’s capacity for innovation and highlights the importance of partnership relations with the ILS market, which enable Groupama to structure effective coverage against Hail losses, » stated Pierre Lacoste, Reinsurance Director of Groupama Group, in the original announcement.

The timing is opportune, as the broader ILS market is experiencing a period of robust growth and investor appetite. The total outstanding value of catastrophe bonds recently surpassed $58 billion globally, with record-breaking issuance in the last two years. For institutional investors like pension funds and multi-asset firms, cat bonds offer two compelling features: attractive yields and returns that are largely uncorrelated with the performance of traditional financial markets like stocks and bonds. This diversification is highly prized, particularly in volatile economic climates. The success of this hail-focused bond indicates a growing sophistication among investors, who are now comfortable analyzing and pricing more niche, climate-related perils beyond the traditional focus on US hurricanes and earthquakes.

Setting a Precedent for Climate Risk Financing

The Quercus II Re DAC bond is being hailed across the industry as a landmark transaction, setting a powerful precedent for the future of climate risk financing. As the first cat bond since 2010 to solely cover severe convective storms, it proves that the ILS market has matured to the point where it can offer bespoke solutions for perils that are intensifying due to climate change.

The regulatory underpinning of the bond is also significant. The issuance received approval from Irish regulatory authorities under the stringent Solvency II regime. This not only confirms the bond's robustness but also highlights Ireland's established role as a leading European hub for ILS transactions, offering a reliable framework for sponsors and investors. For Groupama, this Solvency II compliance is critical, as it ensures the risk transfer is fully recognized for regulatory capital purposes.

As extreme weather events continue to challenge the sustainability of traditional insurance models, the innovation demonstrated by Groupama is likely to be emulated. The successful placement of a bond for a peril as specific as hail opens the door for other insurers to seek similar coverage for their unique exposures, whether from wildfires, floods, or other forms of atmospheric disturbance. This shift towards more granular, data-driven risk transfer instruments marks a crucial step in building financial resilience in an increasingly uncertain world.