Life insurance benefits from rising prices, and that’s just the beginning

4% in 2008, 2.50% in 2014 and only 1.30% last year, according to France Assureurs! The fund’s average return in euros on a life insurance policy has continued to fall in recent years. However, this trend was soon to reverse. The rise in interest rates, which took off during the year 2022, breathes new life into the French’s favorite safe investment.

3% for the 10-year OAT from the French government

For example, the French government’s 10-year OAT (Obligation assimilable du TrĂ©sor) went from a barely positive rate at the start of 2022 to 3% a year later. Even Germany, which is still considered the best signature in Europe, has seen its prices rise sharply around 2.50% at the moment. These levels are certainly not unprecedented, but they hadn’t been touched in a decade.

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A fund in euros, consisting on average of around 80% bonds, of which 40% issued by governments and 60% by companies, according to the analysis of Good Value for Money (GVFM), logically sees its return as very sensitive to this . development.

In fact, the insurance company, which normally carries the bond securities it holds directly until they are repaid, uses the coupons to deliver the fund’s returns in euros. Mechanically, an increase in interest rates is therefore favorable to insurance companies’ new investments and will improve the return on their assets.


Life insurance: here is the 2022 rate for the best Euro fund on the market

However, the saver must be patient before the increase in the fund’s return in euros is significant, the time it takes for the company to reconstruct a significant stock of more profitable bond securities. The erosion of yields has been very slow, it is likely that their rise will be equally slow.

Reserves to increase yield

Unless the insurance companies decide to give it a boost, starting this year. For this, they have a return reserve, called provision for profit sharing (PPB). In recent years, life insurance companies have been particularly far-sighted in adding significantly to this reserve at a time when bond yields were falling. According to the estimate of Good Value for Money, the companies had 71.4 billion euros in reserves at the end of 2021, which corresponds to a return of 4.87% compared to 1.43% in 2012.

In other words, by taking over this reserve, insurers can improve the return on their euro-denominated funds by almost 1% per year on average over the next five years.


Life insurance: why savers will get some of their returns back in 2022

After a year 2022 marked by a return of inflation and an increase in the rates of regulated savings accounts, it is likely that some market players will decide to take the leap in order to maintain the strong attractiveness of their contracts and thus create appetite. euro fund. Now may be the time to see interest rates rise and reserves fall.


Life insurance: how savers are relieved of part of their returns

The traditional yield announcement ball at the start of the year will be most exciting to follow. There is no doubt that on this occasion, savers will find a great interest in comparing the best life insurance contracts on the market.

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