Prudential Control and Resolution Authority Plans to Regulate Units of Account in Life Insurance Policies

In order to protect life insurance policy holders, the Prudential Control and Resolution Authority will tighten the screw. Result: almost one unit of account in ten could quickly disappear.

The Prudential Control and Resolution Authority, or ACPR, which plays the role of policeman of the banking and banking insurance sector, is looking into the units of account (UC), these unguaranteed supports of life insurance. In the ACPR’s crosshairs? Account units whose cost/performance couple is not satisfactory.

The ACPR in the fight against certain units of account

In June, the Prudential Control and Resolution Authority announced the color: from the end of 2023, the units of account offered within the framework of life insurance contracts will have to display a sufficiently cost/performance ratio. protector of the interests of the customers concerned. In other words, the fees charged to the saver must not be disproportionate to the performance of the support.

As a reminder, life insurance has two main categories of support: euro funds, which are secure, and unit-linked funds, the capital of which is not guaranteed, and whose value can therefore go up or down. What the ACPR intends to better regulate is only the units of account, which still represents almost 40% of payments made over the first seven months of 2023 according to France Assureurs, as much as in 2022.

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Nearly 10% of units of account could disappear

Thanks to the analysis of the costs and performance pair of each unit of account, the Prudential Control and Resolution Authority will be able to identify the UC supports offered by insurers which display returns that are too low in comparison with the fees charged. The ACPR adds that “the possible maintenance of a unit of account in the commercial offer despite a degraded 5-year fee/performance pair will, in this case, remain limited and, qualitatively, justified”.

Media that are too expensive in relation to the performance provided will therefore largely disappear from the life insurance landscape. Good news for policyholders, especially since UCs are on the rise. According to the words of Agnès Lossi, partner of the consulting firm Indefi, reported by Les Echos, “the delisting will affect around 10% of the units of account distributed on the French market”.

Insurers caught between the pincers of the ACPR

The objective of the ACPR is clear: to force insurance companies and banks which offer life insurance contracts to their customers to review their offer to protect savers. Players offering units of account that do not meet the criteria defined by the sector watchdog will therefore have two choices: lower their costs, or simply remove the failing support from their catalog.

According to Agnès Lossi, the units of account most affected will be, first of all, those with the lowest outstanding amounts. For them, the solution favored by distributors of life insurance contracts will above all be their elimination. For larger units of account, insurance companies and banks may choose to lower fees or remove them from their offering. In all cases, this will automatically result in a drop in income for managers: “Ultimately, the operation will reduce recurring annual income from the funds by 8% to 10%, which we estimate between 6 and 7 billion euros” , explains Agnès Lossi.