Issuu on Google+

France Insurance Country Overview

2013


Table of Contents 1. Macroeconomic Picture ................................................................................................... 3 2. Insurance Market in France .............................................................................................. 4 2.1 Overall Insurance Market ................................................................................................................ 4 2.2 Non-Life Segment ............................................................................................................................ 5 2.3 Other Key Observations ................................................................................................................... 5

3. Competitive Scenario ....................................................................................................... 7

2


1. Macroeconomic Picture

Source: IMF

French economy has slowed down amid the economic contraction in the euro area in 2012, but has fared better than many of its European peers thanks to relatively resilient domestic demand and in spite of disappointing exports. GDP slowed down in 2012 with growth rate of 0.03% as compared with 1.7% in 2011. However, after three quarters of stagnating GDP and historically low levels of corporate profitability, prospects for an imminent recovery have waned. Overall, with 0.03% annual GDP growth in 2012, the French economy is forecast to remain anemic. The recovery is expected to be slow in 2013, with a modest increase in GDP of 0.07% and the same is forecast to reach USD 3 Tn by 2017 - an average growth of c. 1.17% (at current prices). Firms are forecast to limit employment creation in order to maintain their profitability and productivity. Economic activity is set to gradually gain momentum after 2014. Confidence is projected to improve gradually in line with the expected fading of the euro-area sovereign-debt crisis and some improvement in the country's fiscal position. Households are set to reduce their relatively high savings, private companies are forecast to accelerate their investment spending, and external demand is foreseen to strengthen. GDP growth is therefore projected to increase to 1.8% in 2017, slightly above potential growth.

3


2. Insurance Market in France 2.1 Overall Insurance Market Insurance Penetration in France (%)

Gross Premium Written in France (€ bn)

Source: Fédération Française des Sociétés d’ Assurance, Thomson Reuters

France’s Non-life sector resilient despite economic difficulties…… The French insurance market has experienced significant volatility during the past few years, although the non-life sector continues to grow. Life as well as Non-life market expanded in 2012.The non-life sector benefited from a harder market, with rates for motor lines in particular lifted to improve profitability. A benign year for natural catastrophes in 2011, compared with 2010, also supported the non-life market. The sector posted improved profitability levels in 2011 and is maintaining a solvency margin well above the regulatory required amount. GPW for the non-life segment increased 1.6% to an estimated €48.6 billion in 2012. This is a record level for the non-life market, with rate increases mainly accounting for the increased premiums. The sector has shown good underwriting discipline in what has been a challenging investment environment, which is unlikely to improve in the foreseeable future. Any deterioration in Euro zone macroeconomic fundamentals is likely to have a negative effect on the market’s overall capitalization. However, as in other European countries, the slowdown may result in an overall reduction in claims as a result of reduced economic activity.

4


2.2 Non-Life Segment France Non-Life insurance by Segment, 2012

France Non-Life Combined Ratio, 2009-11 (%)

Source: Fédération Française des Sociétés d’ Assurance, Thomson Reuters

Almost every line of business (with the exception of commercial property which remained stagnant) contributed to non-life growth. Motor, the largest line of business at 40% of non-life GPW experienced a near 4% increase in premium to €19 billion. The second-largest class of business, household property, enjoyed 6.3% uplift in GWP to €8.4 billion. The increases in non-life GPW are, in part, a result of higher rates. Insurers are exercising greater underwriting discipline, as the continued uncertainty in the Euro zone has resulted in historically low government bond yields. The French non-life insurance sector has improved its underwriting profitability in the past two years. However, natural catastrophes remain among the most significant threats to this trend. Notable events have included severe flooding in Var in the summer of 2010. In December 2011, windstorm Joachim struck the north of France and was followed by windstorm Andrea, which caused damage in various areas of the country in January 2012. A combination of rate increases in 2011 and a more benign claims environment has driven the large improvement in technical profitability and rate increases is expected to continue in 2012 and 2013, albeit at lower levels than those achieved in 2010 and 2011.

2.3 Other Key Observations Strong Competition Competition in the non-life insurance market is gaining ground from low-cost products offered via the internet by large groups such as Groupama (Amaguiz), AXA (Direct Assurance) and MACIF (idmacif) or by internet brokers.

5


The success of such offers is supported by the difficult economic environment and the shift of some policyholders towards less expensive and simpler non-life insurance products due to a decline in their purchasing power. The current environment of increased tariffs and the development of online comparative insurance operators (known as ‘aggregators’, which have been very successful in other countries, such as the UK) have increased the attractiveness of low-cost offers. Change in Regulation The French government intends to pass legislation to reform the natural catastrophe insurance system, known as Régime Cat Nat (Nat Cat scheme). The reform will not bring any changes to the current articulation of the scheme, in which the French national reinsurer, Caisse Centmle de Reassurance (CCR), plays a major role, but it should ensure coverage is based on an exhaustive list of named perils. Growing Role of Bancassurance The bancassurance channel has continued to play a growing role in the non-life sector, mostly on personal lines. This trend will intensify in 2013 with the development of La Banque Postale’s non-life insurance offer. La Banque Postale is well positioned to rapidly capture market share in this segment due to its access to an extensive network of 17,000 post offices and outlets, the largest in France. Its entry into the non-life insurance market should intensify an existing trend for general agents to increase the size of their distribution networks and capitalize on their expertise in order to remain competitive.

6


3. Competitive Scenario France’s Largest Non-life Groups Market Share for Leading Non-Life Players (2012) Combined Ratios for Leading Non-Life Players (2012)

Source: Fédération Française des Sociétés d’ Assurance, Company Reports

Non-life insurance market did not experience major changes in the number of companies in 2011.Concentration remained high, with the 10 largest non-life insurance groups representing 73% of premiums collected, although this is lower than in life. A number of French insurers are attempting to grow outside of France, seeking risk diversification and faster growth through M&As. Covéa acquired UK insurer Provident Insurance in June 2011. In April 2011, the French SGAM purchased an 81% stake in Banca Popolare di Milano ‘s life operation, which controls BPM’s P/C business, BPM Assicurazioni. French insurers also see opportunities in emerging markets in Africa, given its relative proximity and common language. French insurers such as AXA, as part of a wider emerging markets strategy, are focusing on western African countries including Ghana, the Ivory Coast and Senegal, although they face competition from Moroccan insurers. The breakdown of total premiums by distribution channel remained more or less unchanged compared with previous years, as tied agents and direct mutual insurance companies continued to dominate the market, with shares in GWP written of 34% and 33%, respectively. Other major distribution channels include insurance brokers that focus on commercial lines (18% of GWP written), bancassurance (11%) and, to a lesser extent, direct insurance (2%).

7


Insurance country overview france