The French have used these past 20 years life in euros

The financial crisis is an extreme event which is a crucial test for pension funded worldwide. In many countries, households are fiscally encouraged as soon as their entry into the labour market to be an individual savings for their old age. The United States have put in place a system, the famous 401 plans tel k, in 1980. In it, the financial risks are entirely borne by households, which can be led to drastic reassessments of their financial crash plan: report of the age of retirement or reduction in the standard of living. Because many of them had massively invested in shares the savings of a lifetime. For example, 28 of Americans more of 55 affiliated academics to the very famous TIAA-CREF pension funds held 100 of their equity investments before the crisis.

The French have used these past 20 years life in euros. Unlike life insurance in units of account, this system has the advantage of organising a certain solidarity between the generations of savers. During the good years, insurers accumulated surpluses by distributing yields to investors than the profitability of their portfolio, allowing to draw on this reserve during bad years to offer a higher yield than their portfolio. Must be put to the credit of the insurance companies who have assumed the risk of having completed their mission by accumulating before the crisis of the reserves corresponding to approximately 10 of the value of their assets, overall 2.5 times more than the minimum required by the prudential rules. With blood in these reserves, life insurance reported overall more than 4 net year last as in 2007, despite the crisis.

This portfolio insurance is the rationale of life insurers. It allows sharing of risk between generations of insured persons and creates value. In a recent article (1), one of the two authors of this forum shows that it improves the well-being of the household as the would be an increase of 1 per year of the profitability of their savings. In 1977, our colleague from MIT, Peter Diamond, already showed the impossibility of organizing such solidarity between the generations without public intervention. The life insurance industry needs a specific tax system to be implemented, so as to reduce opportunistic investor behavior, if not likely return or get out of life insurance as offered returns are higher or lower than those of direct savings. This risk is real, since the blocking of the funds for the entirety of the tax benefit is limited to eight years. The opportunistic trip in progress on A booklet illustrates this volatility to which insurers are facing.

How should industry respond to the deterioration of the ratios of solvency of insurers, which is the natural counterpart of this intergenerational solidarity in the present context Given the long-term prospect which this solidarity authorizes it, share of 20 traditionally held by insurers in actions (for their activity in euros) appears be a strategy that remains extremely cautious. Remains the question of the policy of participation to the benefits paid to insured persons. In agreement with our models, the declining reserves should prompt insurers-cicadas to reduce the level of rates guaranteed for 2009, as was the case earlier in the decade following the crash of the technology. From this point of view, the commitments in the sector this year seem to generous in the current context. Are they the result of an actually less tense financial situation in the business of insurance in the Bank Otherwise, it should not be that policy implied reinsurance of financial intermediaries by the State as a whole creates the beginning of a leak in front of the whole of the market.