SOLIFE Newsletter Issue 8 | Q4 | 2021
SOLIFE : adapting the business model to lead competition while meeting regulatory requirements
Throughout recent years, interest rates in the financial markets have remained extremely low. This has made it very difficult for insurers to offer significant returns on the Euro fund and created new challenges guaranteeing capital.
The average performance of traditional euro funds is expected to be below 1% in 2022. This trend follows naturally with the decline in bond yields, which represent around 80% of Euro funds’ portfolios. This trend is sure to continue as we move into 2022.
In addition to these facts, the prudential rules imposed by Solvency 2 on assets, impose strict ratios of Euro funds detention.
It’s becoming inevitable that insurers will have to adopt their investment model in a sustained context of low interest rates that are eroding their margins while conforming to Solvency 2 directives.
Several approaches are emerging to slow down the promotion of Euro funds in favor of unit-linked funds and make them more attractive to clients.
Diversification of fund types
Insurers are pushing their subscribers to migrate to unit-linked products by offering them a wide range of funds in line with their ideas:
-Socially Responsible Funds (SRI),
Insurers also offer customized wealth management, and personalized assets allocation through dedicated internal funds. Previously reserved for a very limited audience, these funds are now increasingly popular thanks to more flexible subscription conditions.
For long term investment, some insurers offer
Euro-Croissance funds, which are placed at the junction between the classic euro fund and the unit fund.
Although these fund are difficult to market, they remain a good alternative for subscribers who wish to secure their capital over time.
Euro Funds investment limitation
The access to Euro Funds is more and more subject to investment conditions. For example, no more than 40% of a payment must be invested in risk heavy assets.
Some companies also set limits on the amounts that can be paid into the Euro Fund, for example, some companies impose a maximum of 100,000 Euros.
Gradual securing of savings
Insurers offer a free service consisting of investing in unit-linked products at the beginning of the contract and gradually re-allocating assets in the euro fund as the chosen maturity date approaches.
Multiple investment strategies
Insurers encourage their clients to choose a diversified multi-support life insurance contract in order to boost the performance of their contracts by offering the possibility of choosing more than one strategy in the same contract.
Delegated investment strategy
Contrary to free management, management under mandate makes it possible to entrust the management of the portfolio to an insurance company which will be able to arbitrate the funds in real time.
The company can, while respecting the investor’s profile, choose funds that will meet the criteria desired by the investor, and ensure a better, more profitable return.
⁄ Funds management
Thanks to its configurability, SOLIFE supports many different types of funds.
⁄ Strategy management
The different types of strategies (free, self-piloted, driven or delegated strategy), as well as the investor profiles are already managed by SOLIFE.
SOLIFE allows you to manage these restrictions through technical validations that can be applied to funds, investment strategies, investment services or at product level.
Thanks to the recent implementation of Multi-pockets, it has become possible to allocate several independent investment strategies for the same product (each sub-fund will have its corresponding strategy).
In a changing regulatory environment, and facing growing digital channel requirements, Insurers are confronted with new hurdles to best meet market imperatives.
Therefore, VERMEG’s consistent investment in SOLIFE and focus on addressing regulatory, technological and business changes, ensures that our customers are well placed to meet the challenges ahead.