LONDON--(BUSINESS WIRE)--The 2014 average bonus rate credited to French insurers’ euro-denominated life insurance contracts has decreased by 30 basis points to approximately 2.5%.
In a new Best’s Briefing, titled, “Bonus rates to life savings contracts in France resilient; insurers more prudent,” A.M. Best notes that whilst the average rate of return offered to policyholders of euro-denominated contracts has been decreasing since the early 2000s (when it was above 5%), the decrease recorded for 2014 is the sharpest since 2011. However, the decrease is not as significant as the decline in French 10-year government bonds, which yielded 0.84% at year-end 2014 compared with 2.43% in the previous year. A.M. Best notes that these bonds constitute a significant component of an insurer’s asset composition, particularly for backing euro-denominated contracts.
“The attractive returns generated by life insurance products, in particular compared with the decreasing rates of returns of other savings passbooks such as Livret A, have helped boost France’s life insurance market,” said Ghislain Le Cam, associate director, analytics. “Preliminary figures show that gross life premiums increased by 8% to EUR 128 billion, with net premium collection improving to EUR 21 billion, almost twice the amount reported in 2013.”
However, A.M. Best notes that net premium collection remains small in comparison with the levels recorded in 2009-2010, which reached EUR 50 billion. Ghislain Le Cam added, “Despite the recent turnaround in France’s life insurance market, the operating environment remains challenging. Intense competition between market participants, coupled with a low interest rate environment, will place greater pressure on the sector’s operating performance, and A.M. Best expects insurers to continue to reduce bonus rates credited to their euro-denominated contracts over the next couple of years.”
To access a complimentary copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=234433.
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