Life insurance: can you be prevented from withdrawing your money?


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Faced with 2% of the Livret A, the euro life insurance funds pale in comparison. To prevent savers from selling off their assets, a blocking of redemptions is possible. But in what case?

By MoneyVox,

In 2021, the average return of euro funds from life insurance contracts was only 1.28%. While the Livret A rate has just been revalued to 2% net since August 1, savers might want to arbitrate in favor of this more liquid and free of charge investment. Some are worried about the effects of the Sapin 2 law, which makes it possible to block or delay such operations. If massive withdrawals were to arise, could insurers really prevent certain customers from recovering their capital?

The Sapin 2 law allows a blocking of life insurance redemptions

Adopted in 2016, the Sapin 2 law made headlines in the financial sector. Its article 21 bis, in particular, had then raised concerns at Afer, an association of savers, which then spoke of a “socially irresponsible” and “legally questionable” measure. This provision aims to allow insurers to limit, suspend or delay redemption operations or payments on life insurance contracts. To activate this lever, however, a safeguard is provided: the Sapin 2 blocking can only be used in exceptional circumstances, echoing the economic crisis of 2008.

According to several financial experts, the fear of the use of article 21 bis of the Sapin 2 law is unfounded for the moment. Stellane Cohen, President of Altaprofits, explains: “Of course, zero risk does not exist. In the event of an exceptional situation, the HCSF [Haut conseil de stabilité financière, NDLR] will have the possibility to impose certain measures. But we are not currently in a serious situation for the stability of the financial system which would explain why the HCSF triggers the Sapin 2 law. What is more, such a measure can only be temporary and decided for 3 months, renewable once, i.e. a total of 6 consecutive months of blocking at most.

Read also: Life insurance: the 6 important information to look at on your annual statement

Life insurance contracts are not (yet) affected by mass withdrawals

For the moment, the companies are not seeing massive redemption requests on their life insurance contracts. On the contrary, the overall collection is positive, which means that savers deposit more money on their contracts than they withdraw. Philippe Crevel, director of the Cercle de l’Epargne, confirms this trend: “For the moment, there is no beginning of risk. We do not see any massive outflows”.

First of all, it should be noted that the change in the Livret A rate is very recent, having only just increased to 2% on August 1st. But above all, the 1.28% return posted by life insurance contracts in 2021 only concerns capital invested in euro funds, these funds with guaranteed capital. Life insurance has another facet, units of account, which are not guaranteed, but can provide hope for better profitability. Nearly 40% of the payments made since the beginning of 2022 are now directed towards this type of investment vehicle, largely favored by multiple incentives from insurers.

What return for euro funds in 2022?

The yields of euro funds are only known a posteriori, i.e. during the first months of 2023 for the remuneration paid in 2022. However, we should not expect great performances, but rather a further fall in the rates issued. to savers. According to Stellane Cohen, the yield could go down to 0.6 or even 0.5%… unless insurers decide to use their reserve of money. Indeed, each year, the companies put part of their profits aside to be able to distribute them later to their customers, and thus smooth the remuneration of their contracts. The PPB, Provision for profit-sharing, could thus allow certain insurers to deliver up to 2% return for 2 years.

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