In 2023, insurers and pension funds adapted to the new interest-rate environment
Bulletin No. 254, article 1. Following the rise in interest rates that began in 2022 and continued through the first three quarters of 2023, French insurers and pension funds invested more in interest rate products in 2023, through money market and bond collective investment undertakings (CIUs), and certain categories of debt securities.
Insurers endeavoured to guarantee a high level of asset liquidity while smoothing out market fluctuations. Thus, the revaluation rate paid to policyholders on euro-denominated life insurance policies increased significantly through the use of the provision for profit-sharing, and the rise in redemptions by policyholders observed in 2023 was halted from the first half of 2024.
1 Insurers and pension funds reinvested in fixed-income products in 2023
In 2023, the investments of insurers and pension funds regained a third of the value lost in 2022
At the end of 2023, the value of French insurers’ and pension funds’ investments totalled EUR 2,848 billion, with life insurers accounting for 78.0% of this amount and non-life insurers 15.6%. Despite the approval of a new fund in 2023, the share of pension funds remained limited at 6.4% in 2023, after 6.3% in 2022.
Investment outstandings were up by 4.8% (i.e. EUR 132 billion) on 2022. This can essentially be explained – for EUR 100 billion – by positive valuation effects on all categories of portfolio instruments, which offset around 30% of the sharp devaluations observed in 2022 (EUR 342 billion). The bond portfolio increased by 4.3% (i.e. EUR 56 billion), thanks to the fall in interest rates at the end of the year, which enabled the 10-year OAT rate to end the year 55 basis points below the level recorded at the end of 2022. Non-money market CIU shares/units also posted a year-on-year rise, climbing by 5% (i.e. EUR 38 billion), in line with stock market index trends (the CAC 40 rose by 16.5%).
Net investment flows in securities were more mixed. Overall, despite the rise in redemptions of life insurance policies (see section 2 below), insurers and pension funds recorded net acquisitions of EUR 16 billion in 2023. This net amount is the result of different dynamics: while net acquisitions of money market CIU shares/units amounted to EUR 24 billion, net sales of equities and participating interests totalled EUR 9 billion.
In the new interest rate environment, insurers and pension funds redirected their investments towards interest rate products
As interest rates began to rise in 2022, insurers and pension funds stepped up their investments in interest rate products (debt securities, money market and bond CIUs), and reduced their investments in equity products and financial real estate (equities and non-money market CIUs, except bond CIUs).
As regards interest rate products, 2023 was marked by a sharp upturn in investments in money market CIUs. …
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Updated on the 20th of November 2024