French life insurers enjoy capital ratio advantage over Italian and German peers

Written by Adam Cadle

30/01/2025

The life insurance sectors of Germany, Italy and France are adequately capitalised overall, with French insurers enjoying an advantage over their Italian and German peers, according to Moody’s Capital Tool (M’CT).

The capital ratio of French life insurers has been measured at just under 500%, with Italy around 200% and Germany at around 150%.

In contrast, a straight comparison of their Solvency II regulatory ratios suggests that German insurers have the strongest capitalisation. Moody’s said this divergence mainly reflects the use of transitional measures in Solvency II and M’CT’s more economic modelling of insurers’ balance sheets notably with regard to profit sharing reserves and sovereign risk.

Moody’s added that the French market is most exposed to the risk of customers surrendering their policies (lapse or surrender risk), the German market to interest rate and equity risk, while the Italian market is most exposed to credit risk, notably domestic sovereign risk. Interest rate risk is lowest in Italy and highest in Germany, reflecting differences in product design and asset liability management practices.

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