Little insurance coverage for News in widespread transport strikes in France and Germany

By Rick Mitchell, and Richard Miller in Germany

PARIS--The recent nine-day French rail strike cost business hundreds of millions of euros a day, but principles enshrined in the country’s constitution mean that the majority of those losses will be uninsured.

Meanwhile strikes in Germany also are expected to cost business millions of euros, most of which will also not be insured under business interruption policies, sources say.

Public sector workers across France went on strike to protest about President Nicolas Sarkozy’s proposed reform of rail and government workers’ special retirement provision that currently allows them to retire after 37.5 years of service, rather than the 40 years that most other French workers must log to retire.

The strikers voted Nov. 23 to return to work.

The strike by some half a million rail and other government workers stranded thousands of metro and train travelers, many of whom were forced to walk, bike or hitchhike to work. It left shops, restaurants and hotels bereft of customers, particularly in Paris, and forced businesses to search for other ways to ship goods and receive supplies. In addition, high-speed rail lines were sabotaged, officials said.

Huge losses

The Paris Chamber of Commerce and Industry reported on its Web site that its survey of businesses in Paris and its surrounding areas found close to 60% reporting a sales loss for November.

But businesses are unlikely to be able to recoup their losses from insurance policies, experts said.

“The right to strike is engraved in the French constitution, so anything that could weaken that right is prohibited,” said Michel Yarhi, president of France’s risk manager group, the Association pour le Management des Risques et des assurances de l’Entreprise in Paris.

“To allow an employer to insure against economic consequences of a strike would take away from the strikers’ ability to pressure their employer,” he added.

Laurence Parisot, president of France’s business association, the Mouvement des Entreprises de France, in a recent French radio broadcast called the strike’s economic cost “incalculable, which is to say, gigantic. It will have extraordinarily damaging consequences.” The ministry of finance estimated a cost of €300 to €400 million per day, mainly based on lost hours worked, a ministry spokesman said.

Businesses will have to absorb most of these losses, because insurers cannot cover them and the government cannot compensate them either, said Mr. Yarhi.

Self-insurance for these losses through captives would also be barred. “About the only recourse for businesses would be digging into reserves,” he said.

“The French system does not consider transportation stoppage an insurable risk for business,” in most cases, said Mr. Yarhi.

There are some instances where businesses may be able to make claims, however, Mr. Yarhi noted.

“If your business loses access to a key supply, say, electricity or telephone service, because employees at those companies strike, that would be insurable under loss-of-supplier coverage. In other words, if you cannot run your machines because there is no power, that is insurable,” said Mr. Yarhi. “Deliberate physical damage caused by strikers is also insurable,” he said.

Philippe Dupleix, Paris-based manager for special risks at Marsh France, a unit of New York-based Marsh Inc., agreed that the majority of strike-related losses would not be covered by traditional lines of insurance.

“Certain types of professions could get coverage, but they would have to subscribe to a special policy. For example a mail order company, which relies heavily on the postal system, could insure against the consequences of a postal strike,” he said.

“A tour operator or an event-management company could insure against cancellations caused by a strike. But again, these are special contracts, and there are really very few of them. For the most part, it is not possible to insure against sales losses caused by a strike,” he said.

Although rail and government workers returned to work late last month, France still faces several other protests over Mr. Sarkozy’s plans to reform France’s retirement and healthcare systems, and its employment laws.

Meanwhile, rail workers in Germany also went on strike last month and last week were still embroiled in a long-running dispute over pay and conditions.

German dispute

The Frankfurt, Germany-based railway union, the Gewerkschaft Deutscher Lokomotivführer and Berlin-based national rail operator Deutsche Bahn A.G. held fresh talks this week to try and end a three-month dispute over pay and conditions.

Railway operators staged a 62-hour strike that started on Nov. 14 that some economic researchers estimated had a total economic impact of between €70 million and €80 million, according to a spokesman for Bundesverband der Deutschen Industrie e.V., the German industry association. At the time, BDI called the strike “irresponsible” and said such actions hit the steel, chemical and automotive industries hardest. In fact, the strike forced Ingolstadt, Germany-based carmaker Audi A.G. to cancel a shift at one of its plants because of parts shortages. Press accounts also reported shipping containers piling up at the port of Hamburg, Germany.

In terms of insurance coverage, normal business interruption policies do not cover losses caused by a strike, unless because of property damage, several insurers noted.

(Appeared Dec. 3, 2007)