Life insurance investments got off to a flying start in 2021. For the first time since April 2019, net inflows from these contracts (deposits less withdrawals) exceeded 3 billion euros in January.
Up by 300 million euros compared to December, this inflow is mainly based on unit-linked units, which drained 3.8 billion euros net, while funds in euros recorded a net drop of 800 millions of euros.
All life insurance contributions for the first four weeks of 2022 thus amounted to 13.8 billion euros (+0.3 billion euros compared to January 2021), bringing the outstanding total life insurance contracts at 1.871 billion euros at the end of January, up 4.3% over one year.
Marked by the communication of the annual performance of the contracts, and by the payment of part of the tax credits, the month of January was conducive to high savings, essentially oriented towards risky vehicles.
Good performance of PER
Retirement investments were also a major driver of the increase in inflows: contributions paid into retirement savings plans (PER), up 72% compared to the same period last year, reached 568 million euros, and 461 million euros in net inflows.
France Assureurs (formerly the French Insurance Federation) reports that 70,000 people took out a new plan with an insurance company over this period, and that 99,000 savers also transferred old contracts to a PER (with 1,721 million euros paid over the month).
In total, at the end of January 2022, 2.8 million policyholders held a PER via an insurance company for an outstanding amount of 31.2 billion euros.
It remains to be seen, given the new geopolitical context, how life insurance will get through the rest of the year… Last Sunday, government spokesman Gabriel Attal, and yesterday evening, the President of the Republic, in his speech to French, have already warned that the Russian invasion in Ukraine will have certain impacts on national growth and household budgets.
In a context of galloping inflation, and with the explosion in the price of oil, other raw materials and agricultural commodities, the purchasing power of the French, already undermined, will further decline. The fears of an escalation of the conflict – unprecedented in Europe since the end of the 2nd World War – will also not be without consequence on the level of household confidence, and ultimately on their savings reflexes.
Exposure of insurers limited to Russian assets
A week after the start of the Russian invasion in Ukraine, the French insurance sector has already implemented the sanctions and asset freezes decided at the level of the European Union, the United States and the United Kingdom , assures Franck Le Vallois, managing director of France Assureurs.
” The impacts of this crisis for insurers are limited: the exposure of French insurers to Russian and Ukrainian assets remains very very limited since it is less than 0.03% of all their investments “, he specifies.
As for its consequences on the collection of life insurance, these remain difficult to anticipate for the time being. ” The geopolitical context can have effects on the whole economy that cannot be fully measured”, concedes Franck Le Vallois, who recalls that ” life insurance for French savers represents a buffer against the various effects that a crisis can have”.
A long-term investment – twelve years on average according to figures from France Assureurs – life insurance has the advantage of offering diversified, more or less risky supports, which has allowed it to show resilience during the periods of economic turbulence.
But she is not immune to setbacks at the height of the storm. These contracts, which currently hold 18 million French people, had suffered in 2020 from the health crisis. With the ” confinements which may have prevented the commercial networks of insurers from operating normally”it had suffered an unprecedented outflow of €6.5 billion.
With the recovery observed last year, the turmoil in life insurance seemed like a closed chapter until a few weeks ago. As for the continued growth of unit-linked units – a pocket that is more profitable than funds in euros, but with non-guaranteed capital – it seemed certain: for several years already, the fall in yields on public bonds has been gaining ground for UCs. Insurance organizations are increasingly directing their commercial offers towards these investments, which provide them with new sources of growth and provide better performance for their policyholders.
From one crisis to another
The health crisis, which brought the key interest rates of central banks to the floor, has also accentuated this trend. But 2022 – which therefore marks another crisis – could bring the growth of UC to a halt, at least temporarily.
Asked about the prospects for policyholder asset allocation in the coming months, Franck Le Vallois acknowledges that they are difficult to anticipate for the time being. ” Policyholders should not look at short-term volatility but rather at long-term prospects, consistent with the average duration of life insurance contracts “, he recalls. As far as possible, hunker down despite the return of risk aversion in the financial markets.
The conflict will certainly have an impact on the level and orientation of household savings, which we can bet will be more prudent, in a context of war, volatility and falling markets…
Not to mention that with the gradual normalization of the monetary policies of central banks (which could however be slower than expected), bond rates are destined to recover and allow funds in euros to maintain, or even increase their performance by compared to last year. What make them more attractive than in recent years…