Covid-19: what impact on the life insurance market?

The Covid-19 crisis has prompted the French to accumulate savings, sometimes forcibly, in vehicles such as life insurance. According to Banque de France figures, between the 1st quarter of 2020 and the 2nd quarter of 2021, the surplus of financial savings will amount to 157 billion euros, compared with 111 billion euros at the end of 2020. Focus on the impact of the health crisis on the market.

Life insurance: more deposits than withdrawals

Life insurance continues to appeal to the French, even in the context of the health crisis. This long-term savings product is available in several forms:

  • euro-denominated products with guaranteed capital,
  • unit-linked products guarantee only the number of units and not their value,
  • multi-support contracts.

There are a number of reasons why savers turn to this investment:

  • the possibility of benefiting from a specific tax regime,
  • savings for retirement,
  • a higher overall return than interest-bearing bank deposits.

According to the Fédération Française de l'Assurance (FFA), life insurance has never collected as much as in 2021. August alone saw net inflows of 2.2 billion euros, up +2.2 billion euros on August 2020. Unit-linked products broke records over this period, with more than 2.3 billion euros in contributions paid in. At the end of August 2021, the total value of life insurance contracts outstanding reached 1,854 billion euros.

Finally, taking all investment vehicles together, savers made more deposits than withdrawals in August, a trend that industry professionals expect to continue.

No increased fragility for insurance companies

The Covid-19 epidemic has had a major impact on economic activity. In 2020, global activity has shrunk by -3.5%, according to the International Monetary Fund (IMF). At national level, the Banque de France estimates that GDP will have fallen by 8% in 2020, but that activity will return to pre-crisis levels.

The support measures put in place by national and European authorities have prevented a financial crisis. Insurance organizations, whose average solvency capital requirement (SCR) coverage rate stood at 267% in 2019, have been able to preserve their financial position. Their solvency ratio rose from 243% at the end of 2020 to 254% in Q1 2021.

Against the backdrop of the health crisis, life insurance proved its resilience. After a brief increase in redemptions in early 2020, these fell significantly during the containment period, before returning to levels close to their long-term average. The market is now continuing the transformation begun in the low-rate environment, in favor of unit-linked products, which saw positive net inflows of 23.9 billion euros in 2020.