French life insurers under pressure to cut bonus rates as low interest rates hit

Written by Adam Cadle

04/02/2020

French life insurers are under pressure to cut bonus rates as low interest rates bite.

According to AM Best, low interest rates and flattening yield curves are putting pressure on French life insurers’ traditional operating models, with the consequent solvency considerations and regulatory concern prompting them to reduce bonus rates to euro-denominated contracts and diversify their revenue streams in favour of capital-light products.

Ghislain Le Cam, director, analytics at AM Best said "significantly reducing bonus rates on traditional savings products would enable insurers to protect their margins on core traditional savings business while also encouraging policyholders to redirect their savings toward capital efficient unit-linked products, which have the potential for better performance".

AM Best added: "Efforts by insurers to diversify their business away from interest rate-sensitive products toward low risk, capital-efficient ones should be helped by the adoption in 2019 of the Plan d’Action pour la Croissance et la Transformation des Entreprises Law (the PACTE Law)."

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