Placements – L’Express
- Despite facing headwinds such as increased scrutiny over tax advantages and evolving regulations, life insurance has experienced a resurgence, attracting important investment.
- This renewed interest can be attributed to several factors,including increased savings accumulated during the COVID-19 pandemic and ongoing geopolitical anxieties.
- The declining yields of competing savings products, such as traditional savings accounts and term deposits, have also contributed to the appeal of life insurance.
Life Insurance Rebounds, Attracting Billions Amidst Economic Uncertainty
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Despite facing headwinds such as increased scrutiny over tax advantages and evolving regulations, life insurance has experienced a resurgence, attracting important investment. After a period of stagnation in 2022 and 2023, the sector saw a net inflow of approximately 30 billion euros last year, a level not witnessed since 2010.
This renewed interest can be attributed to several factors,including increased savings accumulated during the COVID-19 pandemic and ongoing geopolitical anxieties. French savers,known for their prudent financial habits,maintain a high savings rate,allocating around 18% of their gross disposable income.
Insurers Tap Into Reserves to Boost Returns
The declining yields of competing savings products, such as traditional savings accounts and term deposits, have also contributed to the appeal of life insurance. While these banking products offered attractive rates in 2023, their returns have since diminished.
Insurers have responded by strategically utilizing their reserves to enhance returns for policyholders. Over the past two years, the funding of euro-denominated funds within life insurance policies has increased substantially, rising from 1.30% in 2020-2021 to 2.60% in 2023-2024. According to olivier Sentis, director general of the Mutual of Ivry-La Fraternelle (MIF), the company allocated 10 million euros from its provision for participation in surpluses to improve the yield on euro funds by an average of 0.20%.
Insurers have also launched promotional campaigns, offering incentives such as reduced fees or bonuses on new deposits, to encourage additional investments in guaranteed assets.Jean-Olivier Ousset, a wealth management advisor in Toulouse, notes that euro funds remain a cornerstone of wealth management, and customers are capitalizing on bonus offers that are expected to continue for some time.
Consequently, the proportion of unit-linked accounts, wich offer exposure to financial markets within life insurance policies, experienced a slight decrease last year. However, the emphasis on diversification remains.François-Régis Bernicot, president of the Management Board of Suravenir, emphasizes the company’s commitment to diversification, highlighting improvements in unit-linked account offerings and the introduction of managed mandates that allow for delegated contract management. Furthermore, many insurers offer improved returns on euro funds for policyholders who diversify a portion of their holdings.
stock market Performance and Private Equity Investments
Favorable stock market conditions last year also played a role. while international equities performed strongly, less risky investments, such as bonds, also generated positive returns. Savers also showed interest in structured products, which offer partial or full capital protection over a fixed term (typically five to twelve years) with returns tied to market performance. These products appeal to investors seeking a balance of risk and reward.
Structured products have gained traction as an alternative to real estate investments, which have become less attractive due to rising interest rates. Though,Jean-Olivier Ousset cautions against viewing structured products as a direct replacement for euro funds,suggesting they should be considered as an alternative to investments in stocks or bonds with added protection.
The year also saw a significant increase in the availability of non-listed assets, such as private equity and private debt, within life insurance policies. Asset managers are actively developing funds tailored to the general public and the life insurance framework.Though, integrating private equity presents challenges due to the inherent liquidity of life insurance contracts, which allows policyholders to withdraw their savings at any time. This contrasts with the long-term investment horizon of private equity, where funds are not publicly traded and resale options are limited. Management companies and insurers must therefore ensure sufficient flexibility.
Access to ETFs and Future Challenges
While 2025 has started positively, several challenges lie ahead for savers. Interest rates are expected to gradually decline, which will likely impact returns on euro funds. Aggressive yields and bonuses are expected to normalize over time. While this does not diminish the relevance of euro funds, their role should remain that of a low-risk asset, with other options, such as unit-linked accounts, providing the potential for long-term performance.
Selecting the right contract is also crucial. Life insurance contracts have evolved substantially in recent years, offering a range of advantages. The best contracts feature competitive fees (0.50% to 0.70% annual management fees), access to a wide array of investment options, including exchange-traded funds (ETFs), and innovative features such as responsible funds or management led by renowned managers. Furthermore, they offer digital tools to manage contracts and make informed investment decisions remotely.
Ultimately, staying informed and understanding investment choices is paramount for making sound financial decisions.
This article is part of our “special investments” series, published on April 24.
The life insurance market is experiencing a meaningful resurgence, attracting billions of euros in investment amidst economic uncertainty.This article, inspired by recent industry analysis, provides a complete Q&A to help you understand the trends, opportunities, and challenges within this evolving financial landscape.
Life insurance is seeing a comeback after a period of stagnation. The sector witnessed a net inflow of approximately 30 billion euros last year, a level not seen since 2010. Several factors contribute to this:
- Increased Savings: The economic uncertainty and the COVID-19 pandemic lead to increased savings, particularly among French savers who save around 18% of their income.
- competitive Returns: Declining yields from other savings products like traditional savings accounts make life insurance more attractive.
Insurers are strategically using their reserves to boost returns, especially on euro-denominated funds. This is reflected in the rise in funding of euro funds from 1.30% in 2020-2021 to 2.60% in 2023-2024. This is achieved with the allocation of surplus funds to improve yields. Moreover, many insurers are offering promotional campaigns and bonuses which include reduced fees or bonuses on new deposits to encourage investment.
Euro funds continue to be a cornerstone of wealth management due to their low-risk nature. They present a relatively secure option,especially when compared to more volatile investments..They are benefiting from the promotional campaigns insurers offer bonuses on new deposits.
The proportion of unit-linked accounts, which offer exposure to financial markets, experienced a slight decrease last year. Nevertheless,the emphasis on diversification remains crucial. Experts like François-Régis Bernicot of Suravenir are actively working to improve unit-linked offerings and introduce managed mandates, including those allowing delegated contract management. diversification also includes improved returns on euro funds for policyholders who diversify their holdings.
Favorable stock market conditions positively impacted life insurance investments. While international equities performed strongly, even less risky investments like bonds generated positive returns contributing to the overall attractiveness of life insurance policies. Savers also showed interest in structured products which offer capital protection over a fixed term. This led to structured products gaining traction as an alternative to real estate investments.
Structured products offer partial or full capital protection over a fixed term (typically five to twelve years), with returns tied to market performance. They appeal to risk-averse investors seeking a balance of risk and reward. While Jean-Olivier Ousset advises caution,suggesting they’re an alternative to stock or bond investments with added protection,rather than a direct replacement for euro funds.
Yes, there has been a significant increase in the availability of non-listed assets, such as private equity and private debt, within life insurance policies.Asset managers are developing funds specifically for the general public and within the life insurance framework. But there are challenges to tackle, such as the inherent liquidity challenges which are connected with long-term investment horizons.
Several challenges require careful consideration:
- Interest Rate Declines: Anticipated gradual interest rate decreases may impact returns on euro funds.
- Normalization of Yields and Bonuses: Expect aggressive yields and bonuses to normalize over time.
- Contract Selection: Choosing the right life insurance contract is crucial:
- Fees: Look for competitive annual management fees (0.50% to 0.70%).
- Investment Options: Ensure access to a wide variety of investment options, including ETFs.
- Innovative Features: Consider contracts with responsible funds or management by renowned managers.
- Digital Tools: Opt for contracts with digital tools for easy management and informed decisions.
The most important fact is to stay informed and fully understand your investment options. Consider that euro funds remain relevant as a low-risk asset. Focus on making informed decisions.
This article is for informational purposes only and is not financial advice. Always consult with a qualified financial advisor before making investment decisions. This is part of our “special investments” series, published on april 24.