François Villeroy de Galhau: The new frontiers of insurance

Madam President, Ladies and Gentlemen,

I am delighted to be with you this evening as part of this event organised by France Assureurs, and I would particularly like to thank its President, Florence Lustman, for her invitation. Insurers play an essential role – that is not always sufficiently recognised – in financing our economy and ensuring financial stability. I would first like to pay tribute to this role, then emphasise that it is set to expand further in the future, and lastly, outline a path for strengthening dialogue with the supervisor.

A tribute

I would like to start by paying tribute to the insurance community, by recalling, of course, the vital role played by France's 600 licensed insurers in protecting individuals and businesses against risks. But also in financial stability, because insurers' asset allocation policy remains very stable over time. It reacts little to the economic and financial cycle, and is capable of covering risks over the long term. Thirdly, and most importantly, in the financing of the real economy; with EUR 2,400 billion worth of investments, the French insurance industry is an essential asset, not just for the financing of government bonds, but also, more importantly, for our businesses. It helps to finance them through its direct or intermediated holdings of non-financial corporation equities and bonds, amounting to some EUR 800 billion, or 33% of its total investments. It also contributes some EUR 700 billion – around 29% of its investments – more indirectly, via its holdings of financial sector bonds... which goes to show that bankers and insurers, who are sometimes viewed as rivals, can in fact have common interests...
 
Two recent or ongoing regulatory changes are helping to bolster this role. The revision of the Solvency II directive encourages long-term investment in the real economy, thanks notably to the Long-Term Equity Investment (LTEI) scheme, which grants favourable prudential treatment to insurers' long-term equity holdings. The European Commission's launch of a review of the European securitisation framework could also provide insurers with new solutions for diversifying their strategic asset allocation. There is much more at stake here than technical discussions over prudential ratios – it is a matter of strategic importance for Europe. The development of equity financing is essential if Europe is to catch up in terms of innovation. Our continent has the resources – private savings; it also has the needs – investment in the transformations of the European economy. But, unlike the United States, it does not have sufficient financial intermediation between the two. This is precisely the goal of a genuine Savings and Investments Union, as recommended by the Draghi and Letta reports. And this Union is not just aimed at banks, markets, private equity funds or venture capital funds. It needs to rely on you, insurers, as well.