Moody’s, the credit rating agency, has revised its outlook on France’s insurance industry, signalling a shift to stability in the property and casualty (P&C) segment while maintaining a stable view on the life insurance sector.
The agency notes that profitability across the P&C market is beginning to recover as premium increases gradually align with moderating claims inflation, allowing insurers to better manage persistent weather-related losses.
According to Moody’s, the improvement in underwriting performance reflects steady progress since 2024, especially in property insurance, which has benefited from reduced catastrophe claims and firmer pricing.
However, despite these gains, combined ratios remain higher than those of peers in other major European markets, a sign of ongoing competitive pressure from bancassurers and mutual groups seeking to expand their market share.
Moody’s reports that life insurers have seen a strong rebound in business volumes since 2024, helped by reduced competition from bank savings products and solid policyholder inflows. Capital positions across the sector remain robust, supporting future earnings potential.
The agency highlights, however, that profitability may come under strain as regulators intensify their scrutiny of whether life insurance products deliver sufficient value for money. This focus is particularly acute for unit-linked contracts, which often carry higher margins. Moody’s adds that new rules obliging insurers to offer a greater share of unit-linked products, typically riskier and more costly, could further weigh on margins.
Competition in the life and health insurance markets is intensifying, with new entrants, including insurtechs, reshaping traditional business models. Moody’s observes that many established insurers are expanding into adjacent lines to diversify revenue, while government mandates for public-sector employee coverage are redistributing market share and driving price competition in already low-margin segments.
Despite a broadly stable macroeconomic environment, Moody’s underscores political instability as a key vulnerability. The agency forecasts that France’s real GDP will rise by 0.7% in 2025 and 0.9% in 2026, with inflation easing to around 1.4%.
Yet the inability of a fragmented parliament to pass a national budget has prompted Moody’s to change France’s sovereign outlook to negative, reflecting heightened fiscal and policy risk. This uncertainty could directly affect insurers, which hold roughly one-fifth of their assets in French government bonds, making them more exposed to fluctuations in sovereign spreads and credit quality.
Moody’s also cautions that the political impasse increases the probability of additional taxes targeting the insurance industry. Proposals currently under discussion include exceptional levies on health insurers and potential taxes on guaranteed life savings products. Lawmakers have also debated curtailing tax incentives for life insurance policies, though Moody’s does not expect such measures to take effect during the current outlook period.
In its analysis, Moody’s emphasises that solvency levels across French insurers remain strong, with limited sensitivity to modest interest rate changes and moderate exposure to sovereign spread movements. Nevertheless, the combination of fiscal uncertainty, regulatory oversight, and competitive pressures continues to pose risks to profitability.
Overall, Moody’s concludes that while France’s insurance sector is regaining balance, its stability rests on a fragile political foundation. Strengthening profitability in P&C and resilient capital in life insurance provide a cushion, but sustained political discord, potential new taxes, and evolving regulatory demands could test the sector’s resilience in the years ahead.
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