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Rising interest rates shake up life insurance

The 2022 life insurance return season promises to be exciting! If the unit-linked entities that have been increasingly successful in recent years, with the fall in the markets, mostly show declining results, Euro funds may bring some good surprises.

Every year, in January-February, insurance companies communicate the remuneration of these funds, which are valued by those who seek safety above all else. After years of decline, the trend could finally be reversed. “We have hit a low point for euro funds”says Thomas Delannoy, Deputy Director General of ASAC-Fapes [une association d’épargnants indépendante].

If the 2022 returns have not yet been decided in the companies, some have already made a gear. “We will increase the rates paid to members to help them maintain their purchasing power in a context of inflation, but in the long term the best defense is diversification”says François-Régis Bernicot, CEO of Suravenir.

However, it is still difficult to know whether all companies will take the same approach. Why ? “Insurance companies are coming out on top”, notes Cyrille Chartier-Kastler, founder of the Good Value for Money site. The context has actually changed drastically in the financial markets.

For years, interest rates have been falling, which has led to a fall in the return on the insurance companies’ general assets, which are made up of 80% of bonds (debt certificates), and which form the basis for the return on the Euro funds. Every new euro invested in recent years has therefore changed the fund’s results in euros. The insurance companies have therefore taken drastic measures to limit their access, in favor of units of account, of unsecured capital subsidies that are largely invested on the exchanges.

“A Paradigm Shift”

But since the beginning of the year, the opposite phenomenon is occurring: the rates do nothing but rise. “While the French state was in debt over ten years more or less at 0% at the end of 2021, it must now offer 2.60% remuneration to its creditors (at the end of September), says François-Régis Bernicot. It’s a paradigm shift! » And a rather favorable development for the insurance companies. “The increase in interest rates provides investment opportunities in securities that have better returns than in recent years”assesses Odile Ezerzer, director of Macif Finance Epargne and general manager of Mutavie.

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