The Sapin II Law: consumer protection or confiscation of savings ?

The law generally known as Sapin II on transparency, the fight against corruption, and modernising the economy was definitively adopted by Parliament on 8 November 2016.

The Sapin II Law is a "catch-all" statute whose main purpose is to fight corruption but also includes many other measures, including and in particular, Article 49 on life insurance.

Expanded the role of the HCSF

This law extends the scope of the Haut Conseil de Stabilité Financière (the HCSF or High Council for Financial Stability) to protect clients and insurance companies from the consequences of a major financial crisis.
               

Reminder: The HCSF was created in 2013 to monitor and preserve the stability of the French financial system. It is chaired by the Minister of Finance and has eight members, including the Governor of the Banque de France and the President of the Autorité des marchés financiers (AMF).

Objectives of the Sapin II Law

The objective pursued by the Ministry of the Economy and Finance is threefold, namely to:

• align the yields from funds in euros with those from long term rates;
• prevent the financial risks associated with a sudden increase in interest rates;
• avoid a crisis which puts insurance companies at risk. 

What are the provisions which apply to life insurance?

In the event of a serious and substantial threat to the financial situation of a company in the insurance sector, the HCSF may take the following precautionary measures:

• temporarily limit the execution of certain transactions or activities, such as the acceptance of premiums or pay-outs;
• temporarily limit the unrestricted use of all or part of the assets;
• delay or temporarily limit, for all or part of the portfolio, the possibility of switches or the payment of advances;
• temporarily limit, for all or part of the portfolio, the payment of surrender values.

Reminder: In November 2016, 120 members of parliament brought Article 49 before the Constitutional Council which authorises the HCSF to limit withdrawals in life insurance. This provision was adopted on 8 December 2016.

The welcome reserved for savers 

Introduced at a time when the economy was having to deal with the problems of central bank intervention, the euro crisis, very low interest rates and lack of confidence in a French government at the end of its mandate, Article 49 could not have come at a worse time. It was highly unpopular and  further angered savers' associations. 
The latter did not need any encouragement to regard Article 49 as an admission of the vulnerability of the French insurance sector or, even worse, as a prelude to confiscation by the State of private insurance policies.