Life insurance and unit-linked: the riddle of the day

No doubt, the year 2022 was that of units of account (2) .

According to figures provided by the ACPR (1) , unit-linked (2) life insurance contracts proudly show positive net inflows of 30.6 billion euros. That is 28% more than the previous year. Funds in euros, they look gray. They end 2021 again with negative inflows (-12.3 billion euros).

The ACPR cites several reasons to justify this exceptional dynamism of unit-linked supports (2) , starting with insurers who are developing strategies encouraging policyholders to invest in unit-linked (2)(examples: yield bonuses for funds in euros, restrictions on access to funds in euros, enrichment of the financial offer, etc.). And then let’s not forget that the improved economic outlook in 2021, as well as the strong rebound in financial markets that same year, have been tremendous supporting factors.

If the collection was massively grafted on the units of account in 2021, the ACPR makes it known that the arbitrations were mainly oriented towards the supports in euros, up to 5.7 billion euros. How can this situation, which at first sight seems paradoxical, be explained?

Wouldn’t the holders of life insurance contracts have wanted to take advantage of bull markets by modifying the distribution of their asset allocation?

The ACPR provides several explanations, foremost of which is the activation of management options.

With the good orientation of the financial markets, the options of “securing capital gains” were more easily triggered, then automatically arbitrating the gain received towards the fund in euros. The “automatic rebalancing” option may also have turned on in the context. As a reminder, this tool makes it possible to return to a predetermined target allocation in the event of deviations in the financial markets.

Another reason put forward by the ACPR: the arrival at maturity of certain structured products or even their early redemption.

Finally, these arbitrages in favor of funds in euros could be justified by the aging of managed management contracts. Certain management mandates reduce the level of risk as the investment horizon approaches.

(1) Source: ACPR (Prudential Supervisory and Resolution Authority) – Analyzes and summaries n°133 – 2022. The life insurance market in 2021 – April 4, 2022.
(2) WARNING: There is a risk of loss in capital on the sums invested in the units of account. The insurance company only commits to the number of units of account but not to their value. The value of these units of account, which reflects the value of the underlying assets, is not guaranteed but is subject to upward or downward fluctuations depending in particular on the evolution of the financial markets. Past performance is no guarantee of future performance.

Author: pauadu

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