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FOR IMMEDIATE RELEASE
LONDON - APRIL 02, 2019 08:24 AM (EDT)
AM Best has assigned a stable market segment outlook to the French life insurance segment, supported by key factors that include robust, albeit modest, economic growth, a population with one of the highest saving rates in Europe (with traditional life savings products remaining a preferred investment vehicle), life insurance offerings that typically carry minimal guarantees and insurers that have become more prudent in recent years.
A new Best’s Market Segment Report, titled “Market Segment Outlook: French Life”, states France’s life insurers enjoy a high level of market penetration through their privileged place in households’ investment portfolios. Life insurance savings products represent around 40% of households’ savings, with traditional savings contracts remaining the primary driver of income for the life insurance segment.
The low interest rate environment remains a key challenge for the segment. AM Best considers the French life insurers to be better positioned to navigate this challenge than their German peers. The estimated average guarantee on the traditional savings business is low, at around 0.5% for legacy business and 0% on new business. In recent years, insurers have sold traditional products with a 0% guarantee gross of management fees, effectively offering negative guarantees.
AM Best notes that unit-linked offerings are becoming a more important part of insurers’ business mix, reaching a historical high of EUR 39.5 billion of direct savings premiums in 2018. As traditional savings products’ bonus rates continue to fall, and life insurers maintain efforts to adapt their business mix to the challenging operating environment, AM Best expects the shift towards unit-linked products to accelerate, protecting life insurers’ margins, diminishing their investment risk and lowering their capital needs.
AM Best believes that the French life insurers are well positioned to navigate the persistently challenging environment. They have demonstrated discipline in recent years, strengthening their balance sheets and shifting their business mix to reduce the average guarantees in their savings books. These actions should contribute to the industry maintaining profitable results, despite the persistently low interest rate environment.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=284228 .
AM Best is a global rating agency and information provider with a unique focus on the insurance industry.