The broker and comparator in borrower insurance Magnolia has looked at the consequences of the pension reform project on mortgage loans and loan insurance in particular.
Strengthened real estate purchasing power
A little good news to start with, the legal retirement age to be pushed back by two years (from 62 to 64), banks will be able to take into account two additional years of professional income when examining a home loan application. ” The bank will also record the fact that the decline in income that occurs once the borrower retires occurs two years later. It will integrate this data into the financing plan, if the term of the credit goes beyond 64 years “, specifies Astrid Cousin, spokesperson for Magnolia.fr.
No change in guarantees
As far as borrower insurance guarantees are concerned, no change is expected given that the deadline for providing cover for incapacity for work and invalidity is now fixed at the date on which retirement takes effect, and at the later at age 65, or even for certain alternative contracts at the insured’s 71st birthday in the event of the pursuit of a remunerated professional activity. The postponement of the legal age from 62 to 64 therefore does not change anything on the terms of mortgage loan insurance contracts.
Potential increase in claims
This pension reform, on the other hand, risks increasing the loss ratio for insurers because loan insurance contracts will have to cover work stoppages for two additional years. ” While today there are few claims covered by the Temporary and Total Incapacity for Work guarantee between the ages of 62 and 65, because few borrowers exceed the legal retirement age, by 2030, borrowers will retire at age 64, with full pension remaining at age 67, regardless of the contribution period “, explains Astrid Cousin.
Impact on insurance rates
This is where the bad news comes because it is to be feared that the increase in the loss ratio on loans repaid after 62 years will affect pricing. If the pension reform is adopted, Magnolia considers that there will be two options for the insurer: either it passes on the potential increase in claims on its technical margin, or it increases rates between 2% and 5% according to projections.
” With margins of up to 80%, bank insurers have more leeway to absorb the consequences of postponing the legal retirement age. More competitive, the alternatives have much less room for maneuver and could be forced to revise their prices upwards to guarantee compensation if necessary. concludes Magnolia.