This is the last straight line for insurers who are currently fine-tuning their strategy regarding the return of funds in euros (life insurance cars that offer a capital guarantee)… After years of decline, the average interest rate could finally show color in 2022.
Firstly, because the rise in interest rates allows them to invest in higher paying bonds. But Eurofunds are ocean liners and this effect will take several years to have a significant impact on returns. The insurance companies should nevertheless make an effort in relation to inflation. Especially as they face increased competition from Livret A, whose rate was raised to 2% in August and is due to rise further in February 2023.
For this, the companies will be able to count on their reserves. In fact, each year they can choose to distribute the entire fund’s results in euros or to set aside part of it for a maximum of eight years – this is the “provision for profit sharing” (PPB). The specialist website Good Value for Money estimates that insurers will have €71.4 billion in reserves at the end of 2021, or the equivalent of a 4.87% return on stock.
If insurers are reluctant to reveal their projects before the end of the year, several have already confirmed an upward movement, including Suravenir, Apicil and BNP Paribas Cardif. “Our prudent management policy and allocation of provisions for significant profit sharing will allow us to offer a fund in euros with a significant rate increase”points out Fabrice Bagne, deputy managing director of BNP Paribas Cardif, responsible for France and Luxembourg, without giving a figure.
Price changes will, however, vary from one player to another. “It will depend on the size of the reserves and the commercial strategy of each one”, emphasizes Stellane Cohen, president of Altaprofits. However, don’t expect the fund’s big night in euros. “Our various partners are considering rate increases of around 20 cents”reports Edouard Michot, president of the broker Assurancevie.com.
Diversification strategies
Another consequence of the rise in interest rates is that insurance companies should be more inclined to collect savings on the fund in euros. “Within the commercial bank in France, the fund in euros was 100% available up to 500,000 euros and for a few weeks this amount has been abolished”, reveals Fabrice Bagne. Among the strictest insurance companies in this area, however, nothing has yet been announced about this.
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