French and their equities

Channels: Risk, SAA/ALM, SFCR

Companies: Invesco

People: Alexander Mincier

There isn't a single insurance industry event in France where the topic of regulation is not immediately tackled through the lens of the "unfair treatment" of equity in Solvency II.

The long-term equity class introduced into the regulation back in 2018 was the result of France's lobbying (with some help from the Dutch). Despite this 'win', French insurers still want more leeway for holding the asset class.

'Why', you wonder?

Well, of the €264.1bn ($298bn) invested by European insurers in equity in 2020, over a quarter (27.1%) is held by just 16 French solo undertakings.

While French insurers do like listed equity, holding 25% of all European holdings, they lag the UK industry, which holds 28% of it.

On the other hand, when it comes to private equity the French seems untouchable, accounting for 38% of the total investments by EEA insurers.

But rather remarkably, equity investments account for less than 4% of the totality of French insurers' general account investments - way below Sweden's 21.8%, or even the likes of the UK (6.2%), Finland (6.9%) or Romania (7.2%).

Alexandre Mincier, global head of insurance at Invesco, says insurers are increasingly investing in private equity over listed equity as the capital charges can be lower and the return higher.

One of the hurdles for equity investments for insurers stems from asset liability matching considerations, he explains. "How much of the assets match the liabilities and how much surplus do you have to invest in equity?"

Mincier acknowledges that insurers tend to talk more about equity investment than actually investing in it. But he foresees greater allocation going forward as equity markets have performed fairly well in recent times, and the performance prospects for next year are quite good as well.

"I expect insurers to increase their private equity allocations going forward," he says.

Financial and investment data for over 3,000 insurers in Europe and Bermuda is available to users of Insurance Risk Data, a database from Field Gibson Media, Insurance Asset Risk's publisher. It includes European insurers' financial and regulatory filings, including Solvency II SFCR disclosures, into a single, comprehensive and user-friendly database. Click here for a demo/free trial or for more information contact phil.manley@fieldgibsonmedia.com.

David Walker