French life insurers’ SII ratios fall as low interest rates hit

Written by Adam Cadle

11/10/2019

French life insurers’ reported SII ratios have declined in the first nine months of 2019 because of falling interest rates, reflecting pressure on future profits if rates do not increase, Moody’s Investors Service has said.

Some large French life insurers’ SII ratios declined between 15 and 23 percentage points in the first six months of 2019. As interest rates have further fallen by more than 30 bps between the end of June and the end of September, insurers’ solvency ratios are likely to be even lower at the end of the third quarter.

“Solvency ratios are sensitive to falling rates as French life insurers are highly exposed to savings policies with guaranteed rates of return, and because their liabilities tend to be longer-dated than their assets,” Moody’s senior vice president Benjamin Serra stated.

“Weaker solvency ratios mainly reflect pressure on future profits and increased vulnerability to a further decrease in rates, but the risk of accounting capital losses remains limited.”

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