Why Savers Are Rediscovering Life Insurance

According to data from France Assureurs released on May 2, savers deposited 3.5 billion euros more into life insurance policies in March than they withdrew—a level not seen since January 2013.

These "net deposits" have been on the rise since the beginning of the year, reaching 9.3 billion euros between January and March—slightly more than the 9 billion euros deposited into Livret A savings accounts and Livret de développement durable et solidaire (LDDS) accounts during the same period.

"All signs are positive," said Paul Esmein, the trade association's new executive director, as quoted in a press release.

In fact, the life insurance sector posted record premiums last month for the month of March, with 15.7 billion euros paid into policies, while benefits fell by 14% to 12.2 billion euros.
 

Unit-linked policies and euro funds: two drivers of life insurance

Unit-linked products (UC), which are riskier but potentially more profitable, continue to be a preferred investment for policyholders, with their outstanding balance increasing by 2.6 billion euros in March. However, the life insurance sector also managed to revive its second growth driver: euro-denominated funds, which offer guaranteed principal, increased by 0.8 billion euros—the first such increase since November 2021.

The total outstanding balance of life insurance products reached 1.965 billion euros at the end of March, with more than 70% held in euro-denominated funds. This is by far the leading form of financial savings for the French. Life insurance has thus been recovering since January from a 2023 marked by competition from the Livret A and LDDS savings accounts, which offer a more attractive net return than euro-denominated funds.

"The first few months of 2024 were marked by the return to the forefront of euro-denominated funds, which had been shunned by policyholders for many months. At the start of the year, the announcement of their 2023 returns and the promotional campaigns offering bonus rates launched by insurers led savers to return to this type of investment vehicle," explains Philippe Crevel.
 

The Resurgence of Euro-Denominated Funds and the Momentum Behind Retirement Savings Plans (PER)

The resurgence in popularity of euro-denominated funds can be attributed to the sharp rise in interest rates paid to policyholders, which average 2.6% (excluding taxes and social security contributions), according to an estimate by the French Prudential Supervision and Resolution Authority (ACPR). The promotional campaigns offering higher interest rates launched by insurers have also led savers to return to this type of investment vehicle.

In addition, the market for retirement savings plans (PER) is also thriving, with contributions exceeding payouts by nearly half a billion euros in March, and 80,700 new policyholders added during the month (up 11% year-over-year). The Ministry of the Economy welcomed the fact that the Retirement Savings Plan (PER) program had surpassed the thresholds of more than 100 billion euros in assets under management and 10 million account holders by the end of 2023—results “that exceeded expectations.”