A.M. Best Special Report: The French Insurance Market Confirms its Recovery, Yet Challenges Remain

LONDON--()--The French insurance market grew strongly in 2014, experiencing a 6.1% rise in gross written premium (GWP) to EUR 200 billion, driven by the dynamism of the life and savings segment. Compared with the first five months of 2014, the same period in 2015 saw GWP rise by 4%, again chiefly driven by the life and savings segment.

In a new report, titled, “The French Insurance Market Confirms its Recovery, Yet Challenges Remain,” A.M. Best states that the French insurance sector remains solid, although it continues to face a challenging operating environment. The French market is mature and remains highly competitive, with an insurance penetration rate of 9.3%.

In 2014, the life and savings segment benefited from the relative stabilisation of the macroeconomic environment, reduced volatility of the financial markets and the diminishing yields of non-insurance traditional savings products. The life and health sector has continued its recovery in 2015, with an increase in GWP of 5% in the first five months of the year compared with the same period in 2014. A.M. Best expects there will be strong opportunities for well-positioned insurers as the interprofessional national agreement (accord national interprofessionnel or “ANI”) legislation makes it compulsory for companies to offer group health insurance to their employees from Jan. 1, 2016. However, for French life insurers, the most significant challenge remains the low interest rate environment, which is placing pressure on investment results as government bonds constitute a significant component of an insurer’s asset composition.

Ghislain Le Cam, associate director, said: "For the life sector, low investment rate returns continue to represent a key challenge. If life insurers expect to pursue their efforts to maintain the attractiveness of their offerings compared with the low yields offered by other traditional savings products, A.M. Best believes that their margins could be put under further pressure if they fail to shift their portfolios toward more capital-efficient products."

A.M. Best's research also predicts the French non-life insurance segment will remain very competitive. The French non-life insurance sector continues to struggle on a technical level with a combined ratio consistently in excess of 100%. In 2014, the combined ratio improved marginally to 101.3% from 101.9%, hiding a deterioration in the motor segment that was offset by an improved performance of the home insurance line of business. The introduction of new legislation called the Hamon law (“loi Hamon”) is expected to impact rates for the home insurance, motor and loan insurance lines of business.

Yvette Essen, director, research & communications – EMEA, and report author, said: “A.M. Best expects the Hamon law to lead to higher churn potential, increase competition and maintain pressure on rates as insurers compete to retain their client base or gain new policyholders. The new legislation is also likely to contribute to greater usage of Internet-based aggregators, which has been growing in France, although to a lesser extent than in other European markets such as the United Kingdom.”

To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=243173.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Ghislain Le Cam, CFA, +(44) 20 7397 0268
Associate Director, Analytics
ghislain.lecam@ambest.com
or
Edem Kuenyehia, +(44) 20 7397 0280
Associate Director, Market Development & Communications
edem.kuenyehia@ambest.com
or
Yvette Essen, +(44) 20 7397 0322
Director, Research & Communications - EMEA
yvette.essen@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Ghislain Le Cam, CFA, +(44) 20 7397 0268
Associate Director, Analytics
ghislain.lecam@ambest.com
or
Edem Kuenyehia, +(44) 20 7397 0280
Associate Director, Market Development & Communications
edem.kuenyehia@ambest.com
or
Yvette Essen, +(44) 20 7397 0322
Director, Research & Communications - EMEA
yvette.essen@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com