The impact of financial crises on policyholders

The impact of financial crises on policyholders

 

 “ Stop thief !Thief !… My money was stolen from me… ”    

Loss of confidence of life insurance underwriters . The financial crises of 2008/2009 and 2011/2012 , the fall of the stock markets, the loss in the value of the regulated investments of insurance companies which no longer generate financial products, and the collapse in the value of hypercomplexfinancial securities sometimes contained in certain contracts of life insurance unit in s account , havegreatly affected policyholders . For fear , during the last quarter of the year 2011, many of them , as we have seen, gave up taking out life insurance contracts or made withdrawals of funds by redeeming their contract . Such a phenomenon had already occurred during the financial crisis of 2008/2009, following thebankruptcy of Lehman Brothers. 

Predictable scenarios . It should be noted, first of all , that in the event of financial difficulties for insurance companies in meeting their commitments to policyholders, two legislative scenarios can alwaysbe implemented.

- First, under the terms of article L. 612-33 of the Monetary and Financial Code, when the solvency or liquidity of an insurance company subject to the supervision of the Prudential Supervisory Authority or when the interests of its customers, policyholders, members or beneficiaries, are compromised or likely to be, the Prudential Supervisory Authority can take various precautionary measures . On the one hand, it can “ suspend, restrict or temporarily prohibit the free disposal of all or part of the assets of the controlled person ” (C. monet. Fin., Art. L. 612-33, 3 °). On the other hand, it can order the controlled person “ to suspend or limit the payment of redemption values, the option of arbitration, the payment of advances on the contract or the option of waiver ” (C. monet. Fin. , art. L. 612-33, 4 °).     

- Then, in the event that an insurance company cannot meet its commitments, guarantee funds intervene to compensate the insured . Thus, for example, all life and health insurance companies approved in France, including foreign subsidiaries, must join the Guarantee Fund for Insured against theDefault of Personal Insurance (FGAP), which is regulated by Articles L. 423-1 and following of the Insurance Code. In the event of bankruptcy of these insurance companies, policyholders, subscribers, members and beneficiaries of life insurance contracts are compensated by this fund up to 70,000 euros (90,000 for provident pensions). It will be recalled that, in recent years, unrelated to the financial crises, several damage insurance companies have been put into compulsory liquidation (Sprinks, Electric Mutual Insurance Company, MARF, Europavie).     

Past and current scenarios. For the moment, these two disaster scenarios have not beenimplemented. However, cr ises of financial 2008/2009 and of 2011 /201 2 allow to evoke two other storylines.

One of a legal nature with legal actions by underwriters of unit-linked life insurance policies before the courts to have them admit that they have been misled or badly advised by banks and companies insurance (A.) .

The other, of a fiscal nature, with a very strong increase in the amount of taxation of insurance contracts in order to replenish the State coffers (B.) .