N° 162 : Financial key figures of insurers subject to Solvency II in France at end-2023

Gross premiums amounted to €126.9 billion in 2023 (see Chart 1), up 1.8% compared with 2022, driven by euro-denominated products amounting to €72.9 billion (€2.7 billion / +3.8%). Premiums on unit-linked products fell slightly to € 54.0 billion (€-0.4 billion / -0.7%), after an exceptional year in 2022. Although 2023 is the second highest year of gross premiums since the start of the series in 2011, their increase remains lower than surrenders, which increased by 16% (€11 billion) in 2023, due to a marked increase in the first half of the year (+24.4% in the first half compared with the same period in 2022) (see Chart 2). In total, redeemable products in life insurance posted a slight net outflow of €-2.3 billion in 2023 after a net inflow in 2022 (€8.4 billion).

The rise in surrenders can be explained by economic conditions (inflation, higher interest rates and the cost of financing housing loans) as well as by competition from bank term deposits, for which interest rate paid have increased. Nevertheless, the average surrenders/premiums ratio remained contained in 2023 and well below the peak observed in 2012 (75%). Claims (€45 billion) increased more moderately (€1.5 billion; a year-round increase of +3% and on average +3% per year since 2011), driven in particular by an aging population (Chart 3).

The net inflows on euro-denominated products contrasts with that of unit-linked products. Indeed, net outflows on euro products amounting to €-33.4 billion accelerated in 2023 (-3.5 billion), owing to the increase in surrenders on this product (€5.2 billion, 9%) compared with 2022. Net inflows on unit-linked products remained positive at €31.1 billion in 2023, despite an increase in surrenders (+€6.3 billion, +41%), but fell by 18% after an exceptional year in 2022 (see Chart 5). Unit-linked products were also boosted by the net shifts that were largely favorable to them (see Chart 4), with a transfer amounting to €5.1 billion in 2023.

Non-life insurance business grew significantly in 2023.

Non-life insurance direct business premiums increased by 5.9% between 2022 and 2023, and non-life insurance direct business claims increased by 3.9% over the same period (see Table 2). These increases reflect a long-term trend: between 2018 and 2023, premiums increased by 29% and claims by 35% (see Chart 6). Non-life reinsurance premiums also continued to increase (+2.0% between 2022 and 2023), but the amount of claims accepted as reinsurance recorded a first decline after several years of increase. The increase in the amount of direct business premiums can be observed across all business lines between 2022 and 2023 (see Table 3). Direct business claims increased for most business lines, but a slight decrease (-0.3%) was observed for motor insurance (see Table 4). Healthcare insurance in direct business increased by an equivalent amount in terms of premiums and claims (+6.1% for premiums and medical claims).

The combined ratio for all non-life business lines stood at 98.1% at the end of 2023, compared with 99.6% at the end of 2022 (see Chart 7). This improvement, which is also visible in the combined non-life non-health life ratio (101% at end-2023 compared with 103% at end-2022), is driven in particular by motor insurance. This is because this business line has a significant weight in non-life insurance, and it saw the amount of its premiums increase in contrast to the amount of its claims between 2022 and 2023. The combined ratio of medical expenses, which accounted for 72.4% of non-life health premiums in 2023 (and 79.6% of claims), is also improving: it stands at 100.6% at the end of 2023, compared with 101.1% at the end of 2022.

The cost of fire claims and other property damage has risen sharply since early 2018, driven by inflation and repeated natural disasters.

The cost of fire claims and other property damage increased from €10.7 billion in 2018 to €16.9 billion in 2023, a 58% increase over five years (see Chart 8 and Table 5). This business line includes all damage to or loss of property caused by theft, fire, explosion, storm, hail, frost, land subsidence or natural disaster. The price increase since the beginning of 2021 (see Chart 9) has pushed up the amount of property damage claims, especially between 2021 and 2022. In June 2023, riots and urban violence resulted in claims estimated at €793 million, according to the assessment by the Senate Fact Finding Mission. More importantly, natural disasters have become more frequent and costly in recent years. Natural disaster claims have more than doubled since 2018, reaching €3.3 billion in 2023 (see Chart 10), the worst year since 1999. A mission entrusted to three experts by the Minister of the Economy and the Minister for the Ecological Transition provided guidance on how to prevent, price and ensure these events are insurable. These changes are part of a global challenge to adapt to climate change. Against this backdrop, the Ministry of the Economy decided to increase the “natural disaster” premium applied to auto, home and professional property insurance policies as of 1 January 2025.

Insurers’ asset allocation saw little change in the 2nd half of 2023.

Investments by French insurance undertakings amounted to €2,582 billion at market value at end-2023, up 1.9% compared to June 2023 (€2,534 billion) and up 4.5% compared to December 2022 (€2,471 billion). This partly reflects valuation effects relating to the decline in interest rates between those dates and to the increase in equity markets.

Following the significant developments in some asset classes during 2022 due to rising interest rates and equity market volatility, the allocation observed on insurers’ assets at the end of 2023 differed little from that at the end of June 2023. Sovereign bonds accounted for 20% of investments after transparency, financial sector bonds for 27% and non-financial corporate bonds for 11% (compared with 21%, 26% and 11% respectively) (see Chart 13). Insurers also continue to prefer counterparties mainly located in France or the euro area (see Chart 14). Such an asset allocation strategy allows them to have a very large share of liquid and high-quality assets (45%) (see Chart 15).

Insurers also increased their cash holdings and bank deposits as inflation returned and rates rose (see Chart 16).

Due to the slight decline in interest rates in the fourth quarter of 2023, bonds were in an unrealized loss position of around only -4% on average at the end of 2023, compared with -8% at the end of 2022. Unrealized capital gains are still recorded in equities (+32%) and real estate (+25%) (compared with 30% and 33% respectively) (see Chart 17).

Moreover, the higher level of interest rates compared with the low interest rate period allows insurers to reinvest the nominal value of bonds purchased during this period and maturing in bonds with higher returns. The improvement in the return on the portfolio is gradual as new bonds replace those purchased in recent years. As a result, the share of exposures with coupons between 3% and 4% increased significantly (by 3 percentage points, from 9% to 12%) between end-2022 and end-2023 at the expense of other coupons, especially coupons below 2%, the share of which no longer increases (see Chart 18).

The Solvency Capital Requirement (SCR) coverage ratio varies according to the type of undertaking between 2022 and 2023 and is broadly stable for all undertakings.

The solvency ratio of all insurance undertakings was 249% in 2023. It declined slightly in the 2nd half of 2023, but was relatively stable for the year as a whole, standing at 247% in 2022 (see Chart 19). However, the situation differs depending on the type of undertaking: life and mixed undertakings saw their solvency ratio increased between 2022 and 2023 by 12 percentage points, while non-life undertakings saw their solvency ratio decreased by 6 percentage points (see Charts 20 and 21). Bancassurance groups, which comprise life and mixed insurers as well as non-life insurers, saw their solvency ratio increase by 10 percentage points between 2022 and 2023, owing to the significant proportion of life business.

The increase in the solvency ratio of life and mixed insurers was driven by the numerator: eligible own funds to SCR coverage increased by EUR 6.7 billion between 2022 and 2023, while the SCR increased by only around EUR 500 million (see Chart 22). This includes the reconciliation reserve, which grew between 2022 and 2023 for life and mixed insurance undertakings, with its share of own funds increasing from 69% in 2022 to 72% in 2022 (see Technical supplements). The improvement in the solvency ratio of bank insurers was driven by the denominator: the SCR fell by 4.4% between 2022 and 2023, while own funds decreased by only 0.3%. Market risk, which is one of the modules of the SCR, decreased significantly for bank insurers by EUR 2.7 billion between 2022 and 2023. For non-life insurance undertakings, the deterioration in the solvency ratio is induced by the SCR, which increased more sharply (3.2%) than own funds (1.2%) between 2022 and 2023. The rise in the SCR for non-life undertakings was due to an increase in underwriting risk between 2022 and 2023, linked to the increase in provisions and loss ratio. This amount, which is used to calculate the aggregate SCR for all undertakings as a non-life underwriting module, went from EUR 15.4 billion in 2022 to EUR 17.5 billion in 2023.