FEBRUARY 03, 2020 09:13 AM (EST)
Best’s Commentary: French Life Insurers Under Pressure to Cut Bonus Rates as Low Interest Rates Bite
FOR IMMEDIATE RELEASE
AMSTERDAM - FEBRUARY 03, 2020 09:13 AM (EST)
According to a new Best’s Commentary, “French Life Insurers Under Pressure to Cut Bonus Rates as Low Interest Rates Bite”, AM Best expects proactive actions by French life insurers to help them withstand external pressures on solvency and performance.
Ghislain Le Cam, director, analytics at AM Best, said, “From 2020, AM Best expects French life insurers to significantly reduce bonus rates on traditional savings products to reflect the persisting low yields on French government bonds.” He adds that this should enable insurers to protect their margins on core traditional savings business while also encouraging policyholders to redirect their savings toward capital efficient unit-linked products, which have the potential for better performance.
Efforts by insurers to diversify their business away from interest rate-sensitive products toward low risk, capital-efficient ones should be helped by the adoption in 2019 of the Plan d’Action pour la Croissance et la Transformation des Entreprises Law (the PACTE Law).
Pierre Tournier, senior financial analyst, added, “While French savings levels are high, the private pension segment is relatively underdeveloped. The PACTE Law has created a simpler pension product, the Plan Épargne Retraite (PER), which appears to address some of the major issues surrounding French pensions.” Tournier added that to encourage policyholders to adopt these plans, the law provides for a transition period during which transfers into PER contracts receive favourable tax treatment.
AM Best expects the industry’s efforts to transform its profile and the PACTE Law to have a positive impact on the business mix of French life insurers. However, improvements in solvency ratios and operating performance may take time to materialise.
To access a complimentary copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=294097 .
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.