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Against 2% of the Livret A, the euro life insurance funds pale in comparison. To prevent savers from selling their assets, redemptions can be blocked. But in what case?
By Money Vox,
In 2021, the average euro fund return on life insurance contracts was just 1.28%. Although the Livret A rate has just been revalued to 2% net since August 1, savers may want to arbitrage in favor of this more liquid and free investment. Some are concerned about the effects of the Sapin 2 law, which allows these types of operations to be blocked or delayed. If there were massive withdrawals, could insurers really prevent certain clients from recovering their capital?
The Sapin 2 law allows to block life insurance amortizations
Adopted in 2016, the Sapin 2 law made headlines in the financial sector. Its article 21 bis, in particular, had then raised concerns in Afer, an association of savers, who then spoke of a “socially irresponsible” and “legally questionable” measure. This provision is intended to allow insurers to limit, suspend or delay the rescue operations or payments of life insurance contracts. However, to activate this lever, a safeguard is provided: the Sapin 2 lock can only be used in exceptional circumstances, echoing the economic crisis of 2008.
According to several financial experts, the fear of the use of article 21 bis of the Sapin 2 law is unfounded at the moment. Stellane Cohen, President of Altaprofits, explains: “Of course, zero risk does not exist. In the event of an exceptional situation, the HCSF [Haut conseil de stabilité financière, NDLR] will have the possibility to impose certain measures. But currently we are not in a serious situation for the stability of the financial system, which would explain why the HCSF activates the Sapin 2 law. Moreover, such a measure can only be temporary and decided for 3 months, renewable only once, that is, , a total of 6 consecutive months of blocking maximum.
Also read: Life insurance: the 6 important facts you should look at in your annual statement
Life insurance contracts not (yet) affected by massive withdrawals
At the moment, companies are not seeing massive redemption requests in their life insurance contracts. On the contrary, the global collection is positive, which means that savers deposit more money in their contracts than they withdraw. Philippe Crevel, director of the Cercle de l’Epargne, confirms this trend: “At the moment, there is no principle of risk. We do not see massive exits.”
First of all, it should be noted that the change in the Livret A rate is very recent, as it barely increased to 2% on August 1. But, above all, the 1.28% return that life insurance contracts yield in 2021 only concerns the capital invested in euro funds, these funds with guaranteed capital. Life insurance has another facet, the units of account, which are not guaranteed, but can give hope of a better return. Almost 40% of payments made since the beginning of 2022 are now directed to these types of investment vehicles, largely favored by multiple incentives from insurers.
What return for funds in euros in 2022?
The returns of the funds in euros are only known a posteriori, that is, during the first months of 2023 for the remuneration paid in 2022. However, we should not expect great returns, but rather a new fall in the rates issued to savers. According to Stellane Cohen, the yield could drop to 0.6 or even 0.5%… unless insurers decide to use their reserve money. Indeed, each year, companies set aside part of their profits to be able to distribute them later to their clients, and thus soften the remuneration of their contracts. The PPB, Profit Sharing Provision, could thus allow certain insurers to deliver up to 2% return over 2 years.