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Impact of low rates environment on Insurance
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1 Natixis Assurances: who are we? Natixis Assurances supports Groupe BPCE’s ambitions in the insurance sector Through its subsidiaries, Natixis Assurances designs, underwrites and manages the policies distributed by the BP and CE networks1 to their private and professional customers Natixis Assurances is the single insurance platform for Groupe BPCE Natixis Assurances is structured into two major business lines: Life and Personal Protection fully incorporated in 2016 Property & Casualty operated through two different business models Natixis Assurances Life and Personal Protection Insurance P&C Insurance 100% 100% 50% BPCE Vie BPCE Prévoyance Natixis Life (Luxembourg) BPCE Assurances (in-house management) BPCE IARD (operationally outsourced to MAAF) Life Insurance Personal Protection Loans Insurance Motor Insurance Health Household Insurance Personal Accident Insurance Legal Protection Professional Multi-Risk Insurance (1) Banques Populaires and Caisses d’Epargne
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Natixis Assurances: who are we? A fast growing insurer in France
2 Natixis Assurances: who are we? A fast growing insurer in France Premium Income (€bn) Net revenues breakdown CAGR 13-17 Total= €11.7 bn Market CAGR 13-17 Total = € 733 mln +50% 2017 +2.6% Natixis Assurances ranks among the TOP 10 insurers in France P&C Total = €4.2 bn +27% Life and Personal Protection +2.2% P&C Life and Personal Protection (direct business) P&C Life and Personal Protection Market shares (%)1 Life Insurance Motor Insurance Households Insurance x2.5 x4.3 x3 (1) Direct Business , Source: FFA
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3 Stake #1: secure operating result generation through business mix diversification Life Insurance (financial margin based on AuM) P&C (lesser weight of financial results) Maintain a diversified business mix to limit exposure to Life business Reinforce technical discipline in P&C to compensate for the contraction of financial results Focus on higher margin products & customer segments
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Reduction of guarantees but what about customers expectations?
4 Stake #2: secure operating result generation through reduction of guarantees in Life insurance Secure financial margin through reduced profit sharing… A solution as long as the inflation remains limited… Reduction of guarantees but what about customers expectations? TME: taux moyen des emprunts d’Etat – Average French Treasury rate MGR: maximum authorized minimum guaranteed rate, defined as a % of TME for Euro denominated funds
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5 Stake #3: secure operating result generation through diversification of investments Transformation of Insurance asset portfolios to: Limit dilution of financial results (70% to 80% of investments in bonds) Diversify asset classes (e.g. real assets / private debt) …while limiting the increase of embedded risks Contraction of financial results The end of the era of Euro denominated funds (0% guaranteed rate) Life insurers need to prepare for a paradigm shift?
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Stake #4: secure solvency through risk reduction & adapted models
6 Stake #4: secure solvency through risk reduction & adapted models Promote unit linked (UL) to transfer the risk to customers and reduce capital requirements Limit ALM mismatch and capital requirements Limit net collection to limit new cash to be invested? Net collection: cash in (premiums) – cash out (lapses + death benefits + terms)
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Stake #5: secure solvency through risk reduction & adapted models
7 Stake #5: secure solvency through risk reduction & adapted models Strong headwinds from regulation: prudential Solvency 2 (2016) and financial IFRS 17 (2022?) NAV := Assets – Liab. Assets Liabilities Fair value of assets (investments) Best estimate of liabilities Balance sheet in fair value and risk based capital requirements (SCR) built as instantaneous NAV sensitivities to predefined risk factors: 0% minimum guaranteed rate has became ‘capital costly’ Market risk within SCR 80% of total SCR for Life companies Strong impact of model selection in Insurance fair value: reserves (best estimates) based on stochastic valuations thus very sensitive to: parameters (ESG / behavioral assumptions) « management rules »: SAA, profit sharing, etc. Need to adapt models to new low rate environment
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