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French central bank chief tells life insurers to cut payout rates
[PARIS] The head of the French central bank called on life insurers in France to trim returns they offer their policyholders so they do not get dangerously squeezed as interest rates fall.
Life insurers offering guaranteed rates of return to their policyholders are getting pinched in Europe as falling yields on their vast bond portfolios make payouts increasingly difficult.
They are typically big holders of government bonds, whose yields have fallen to record lows in some European countries as investors anticipate further ECB policy easing. "It's very important that insurance companies can cut their payout rates and I am expecting an important fall in payout rates this year," Noyer said during a hearing at the French Senate. "I will make sure that insurance companies do it because we don't want them to put themselves at risk," he said, adding that in France they had more flexibility than in other countries to adjust pay.
In France, life insurance is one of the most popular ways for savers to put aside spare cash because of attractive tax breaks. The market is dominated by players such as AXA and CNP Assurances as well as banks offering insurance such as BNP Paribas and Credit Agricole.