📌 Securities in Insurance: Definition, Benefits, and Risks

In summary

📌 Section	📖 Description
📜 History and evolution	Securities have existed for centuries and have evolved alongside life insurance, including stocks, bonds, and investment funds.
📊 Types of unit of accounts	UCs include stocks, bonds, SCPI, OPCI, and ETFs. They enable diversification but their value fluctuates with the markets.
📉 Impact of economic cycles	Growth favors stocks, while economic crises and rising interest rates impact bonds and funds.
💡 Advantages and risks	Securities offer high returns and diversification but involve risks of volatility and lack of guarantee.
🎯 Choosing an appropriate contract	You need to define your investor profile, analyze fees, compare the performance of supports, and check contract flexibility.
⚖️ Regulations	AMF and ACPR regulate securities in insurance. The Solvency II directive imposes strict management rules.
🚀 Investment strategies	Good diversification, regular monitoring, and suitable arbitrations help optimize securities yields.
✅ Conclusion	Securities boost life insurance but require active management and a solid strategy to minimize risks.

Securities in insurance play a key role in the investment of life insurance contracts. They allow policyholders to access diversified financial investments, while optimizing returns. However, they also involve risks that are important to understand before investing.

In this article, we will detail what securities are, their advantages and risks, as well as the criteria to consider to choose them wisely.

Best life insurance contracts

Past performance does not predict future results. The returns mentioned are for 2024.

🔎 What is a Security in Insurance?

Securities are financial titles that can be purchased, exchanged, or traded on financial markets. They allow investors and insurers to diversify their investments, in search of a higher return than traditional investments. Unlike guaranteed products, they do not offer any capital guarantee, which means the value of the investment can fluctuate according to market conditions.

Within the framework of life insurance, these securities are generally included in unit of account (UC), enabling policyholders to invest in diverse financial assets. These units of account are directly linked to market performance, which can generate an attractive return, but also involves an increased risk of capital loss.

📌 Main characteristics of securities in insurance

📌 History and evolution of securities in insurance

Securities have been used for centuries as an investment tool, and their integration into life insurance contracts has significantly evolved over time. Originally reserved for large financial institutions, they are now accessible to individuals through unit of account supports.

1. Origins of Securities

The earliest forms of securities appeared in the 17th century with government bonds, used to fund wars and large infrastructure projects. At that time, states borrowed from private investors by issuing debt securities.

At the same time, stocks emerged to allow companies to raise funds. One of the first examples is the Dutch East India Company, which issued shares as early as 1602 to finance its trade.

2. The rise of unit of account and investment funds

In the 20th century, insurance companies began diversifying their investments to improve savings contract returns. While guaranteed euro funds remain dominant, the introduction of unit of account (UC) allows policyholders to invest in stocks, bonds, and other financial products.

The growth of collective investment funds, such as UCITS and SCPI, marks a revolution. These vehicles make it easier for individuals to access financial markets without managing their investments themselves.

3. Regulatory developments and their impact on investment

Since the 2000s, regulation of securities in insurance has strengthened to better protect investors. Key measures include:

• Solvency II Directive (2016) requires insurers to hold sufficient capital to ensure investment safety.
• Financial Markets Authority (AMF) oversees financial products offered in life insurance.
• ESG criteria (responsible investing) are increasingly integrated, promoting sustainable and ethical investments.

Today, securities are an essential lever to optimize the return on insurance contracts while diversifying risks.

🏦 How securities work within a life insurance contract?

Securities in insurance are mainly used in multi-support life insurance contracts. Unlike euro funds, which offer capital guarantee, unit of account based on securities fluctuate according to financial markets.

📌 Unit of Account (UC): an Investment with Variable Returns

UCs allow policyholders to invest in a wide range of financial assets. Their value fluctuates based on market performance, so the invested capital is not guaranteed.

💡 Why include securities in your life insurance?

Choosing securities within a life insurance allows for better potential profitability than euro funds, but this strategy must be adapted to the investor profile.

📌 Advantages

✅ High return potential : securities allow for hopes of higher gains over the long term.
✅ Asset diversification : investing in different classes of assets reduces concentration risk.
✅ Access to varied markets : unit of account can include stocks, bonds, UCITS, SCPI, etc.

⚠️ Disadvantages

❌ Lack of guarantee : unlike euro funds, securities do not guarantee the invested capital.
❌ High volatility : their value fluctuates depending on market evolution.
❌ Need for regular monitoring : it is necessary to analyze frequently the performance of investment supports.

🎯 Who are securities in insurance for?

Securities in insurance are mainly suitable for investors with a long-term investment horizon and a risk appetite.

📌 Advice: If you are a prudent investor, it might be interesting to combine euro funds and unit of account for a better balance between security and returns.

📜 Different Types of Securities in Insurance

Securities used in insurance are divided into several main categories, each offering a different level of risk and return. They are integrated into multi-support life insurance contracts, allowing investors to diversify their savings based on their financial objectives.

📌 Stocks: Property Titles with High Potential

Stocks represent a share of a company’s capital. They are listed on the stock exchange and allow the investor to become a shareholder of the company. In insurance, they are often offered as unit of account, meaning their value fluctuates according to the market.

📌 Characteristics of Stocks in Insurance

✅ Advantages of Stocks in Insurance

• High return potential 📈 : Stocks can generate higher capital gains if the company performs well.
• Access to dividends 💰 : Some companies distribute a share of their profits to shareholders.

⚠️ Risks of Stocks in Insurance

• High volatility ⚖️ : Stocks are sensitive to fluctuations of the financial markets and can see their value drop sharply.
• Dependence on the economy 📉 : Poor economic conditions or a financial crisis can negatively impact their performance.

📌 Example: A life insurance contract in unit of account can include stocks of companies like LVMH, Apple, or TotalEnergies, offering growth potential, but with a fluctuation risk.

📌 Bonds: A More Stable Investment

Bonds are debt securities issued by companies or governments. They allow investors to lend money in exchange for a regular interest called coupon. Unlike stocks, they are generally less risky, but their yield is lower.

📌 Characteristics of bonds in insurance

✅ Advantages of bonds in insurance

• Stable income 💵 : Bonds offer a regular coupon, ensuring a predictable income.
• Less volatility ⚖️ : They are less sensitive to market fluctuations.

⚠️ Risks of bonds in insurance

• Rising interest rates 📉 : An increase in interest rates causes a drop in bond value on the secondary market.
• Default risk ⚠️ : If the issuer (company or state) can no longer repay its debt, the investor can lose their capital.

📌 Example: An investor looking to secure a part of their life insurance contract may choose French government bonds (OAT) or corporate bonds like those of Airbus or BNP Paribas.

📌 Investment funds: Optimized diversification

Investment funds group together several financial assets and are managed by professionals. They provide access to diversified management, thus reducing risk linked to a single security.

📌 Types of investment funds in insurance

✅ Advantages of investment funds

• Portfolio diversification 🔄 : Spreading investments across multiple assets to limit risks.
• Professional management 📈 : Investments are managed by experts, optimizing returns.

⚠️ Risks of investment funds

• High management fees 💸 : Costs can reduce profitability.
• No guarantee ❌ : Unlike euro funds, there is no capital protection.

📌 Example: A SICAV fund can include a mix of European and American stocks, while a real estate FCP can group SCPIs and bonds.

🏆 Which security to choose?

Choosing between stocks, bonds, and investment funds depends on the investor profile, the investment horizon, and the risk tolerance.

📌 Advice: To limit risks, it is recommended to diversify investments and monitor market developments.

📈 Advantages and Risks of Securities in Insurance

Integrating securities into a life insurance contract offers an opportunity for dynamic investment, but also involves risks that must be well understood.

✅ Advantages of securities in insurance

📊 1. Potentially high return

Securities, especially stocks and some investment funds, offer returns superior to guaranteed investments like Euro funds.

✔️ Stocks enable participation in growth and dividends.
✔️ Bonds provide fixed income with a moderate risk level.
✔️ Investment funds allow access to varied markets to optimize performance.

⚠️ Warning: A high return always comes with a proportional risk.

🔄 2. Diversification of investments to reduce risk

One of the main advantages of securities is diversification.

✔️ Multi-support contracts enable investing in different assets (stocks, bonds, SCPI…).
✔️ Risk distribution limits the impact of poor performance of a single security.
✔️ It is possible to adjust your portfolio based on economic conditions.

📌 Example: A contract might include 50% stocks, 30% bonds, and 20% real estate funds to balance risk.

🎯 3. Managed by experts

Securities are often managed by professionals, allowing investors to benefit from deep expertise.

✔️ Fund managers analyze market opportunities to optimize investments.
✔️ UCITS funds provide access to advanced financial strategies.
✔️ Some contracts offer pilot management, allowing investors to delegate decisions to experts.

📌 Helpful tip: Even with professional management, it is important to monitor your contract and adjust your allocation based on your objectives.

⚠️ Risks of securities in insurance

📉 1. Market volatility

Securities are subject to market fluctuations, which can lead to significant variability in returns.

❌ The value of stocks can drop sharply during an economic crisis.
❌ Bonds may lose value if interest rates increase.
❌ Certain investment funds can be highly sensitive to global economic events.

📌 Example: An stock bought at €100 can fall to €70 during a recession, negatively impacting savings.

⚖️ 2. No guarantee of capital

Unlike euro funds, securities do not guarantee either the invested capital or a minimum return.

❌ In case of market decline, invested savings can lose value.
❌ The capital is not protected, unless the contract includes a security option.
❌ Poor asset allocation can lead to significant losses.

📌 Advice: To limit this risk, it is recommended to spread investments and avoid putting all savings into a single asset.

⏳ 3. Risk related to investment duration

Securities require a long-term investment horizon to smooth volatility and maximize returns.

❌ Stocks can take several years to recoup their value after a decline.
❌ Long-term bonds may be less profitable if interest rates change.
❌ Real estate funds require a commitment over several years to be effective.

📌 Example: An investor wanting to withdraw their savings after 2 years could face a loss, whereas investing for 10 years would have yielded better profitability.

📢 How to reduce risks?

✅ 1. Diversify your portfolio

A good balance between stocks, bonds, and real estate funds helps limit losses.

✔️ Invest gradually to smooth fluctuations.
✔️ Avoid concentrating all investments in a single asset class.

🔄 2. Regularly monitor your contract

Regular monitoring allows you to adjust your investments according to market developments.

✔️ Change allocation if markets are unstable.
✔️ Reduce exposure to risky assets during crisis.

📆 3. Adjust your investment horizon

Investing in securities requires a long-term vision.

✔️ Don’t panic during temporary market downturns.
✔️ Plan investments over 5 to 10 years to maximize returns.

💡 How to choose a contract with securities?

Incorporating securities into a life insurance contract allows optimizing savings, but it is essential to choose the right contract based on your objectives and investor profile. Several criteria should be considered to ensure the investment aligns with expectations.

📌 1. Define your investor profile

Before opting for securities, it is crucial to evaluate your risk appetite and your investment capacity.

✔️ A prudent investor will choose bonds and diversified funds, which offer stability and moderate returns.
✔️ A dynamic investor will favor stocks, which are riskier but offer higher return potential.
✔️ An balanced investor will opt for a mixed allocation, combining security and performance.

📌 Example: If you have a short-term investment horizon, it is better to prefer secure investments such as bonds or guaranteed funds.

📌 2. Analyze investment objectives

Securities enable to meet different financial needs. It is therefore important to clearly define your objectives before subscribing to a contract.

✔️ If the goal is security, it is better to favor bonds and euro funds.
✔️ If the goal is growth, investing in stocks and diversified funds is recommended.
✔️ If the goal is optimizing profitability, an balanced allocation between stocks and bonds is a good option.

📌 Example: A young investor can favor stocks for long-term growth, while an investor close to retirement will choose more stable investments.

📌 3. Compare fees and performance

Management fees have a direct impact on the profitability of a securities-based life insurance contract. It is therefore crucial to compare different offers.

✔️ A contract with high fees can negatively impact overall returns.
✔️ It is important to check arbitration fees, especially if you want to make regular adjustments to your investments.
✔️ Past returns are also an important indicator, even if they do not guarantee future performance.

📌 Example: A contract with management fees of 2% per year can significantly reduce long-term profitability.

📌 4. Check contract flexibility

A good life insurance contract with securities must offer enough flexibility to adapt to market developments and investor needs.

✔️ The best contracts allow for readjusting investments based on economic conditions.
✔️ Some contracts offer managed management, which can be an interesting option for less experienced investors.
✔️ A flexible contract should allow partial withdrawals, without excessive penalties.

📌 Example: An investor wanting to rebalance their portfolio during a crisis should be able to change allocation without excessive fees.

📌 5. Choose a reliable and reputable insurer

It is important to select a solid insurer, capable of efficiently managing funds and guaranteeing good management of securities.

📌 Example: A recognized insurer, with well-rated funds, offers greater security for the investment.

⚖️ Regulations of securities in insurance

Securities in insurance are subject to a strict regulation to ensure investment transparency and protection of insureds. Several regulatory bodies and European regulations regulate these financial products to guarantee a prudent management and market stability.

📌 1. Regulatory bodies

Several authorities oversee the proper functioning of the securities market and ensure compliance by insurers.

✔️ AMF ensures that securities are proposed transparently and that investors have access to all necessary information before investing.
✔️ ACPR guarantees that insurance companies comply with prudential rules and have enough solvency to meet their commitments.

📌 Example: Before an insurer can offer a unit of account fund, it must be approved by the AMF, which checks its composition and risk level.

📌 2. The Solvency II Directive: A stringent European regulation

The Solvency II Directive is a European regulation aimed at ensuring the financial robustness of insurance companies and protecting policyholders.

✔️ Capital requirements (Solvency Capital Requirement – SCR) ensure that insurers can face potential losses on their securities.
✔️ Regular risk control is necessary to prevent companies from taking excessively risky positions on financial markets.
✔️ Obligations of transparency give investors a clear view of investments and their performance.

📌 Example: An insurer offering unit of account funds invested in stocks must have sufficient financial reserves to cover losses in case of stock market crashes.

📌 3. Insurers’ obligations

Insurance companies must comply with several rules to ensure prudent management of securities.

✔️ The investor must be transparently informed about the risks related to securities.
data-start=”4329″ data-end=”4332″ />✔️ Companies must respect strict diversification rules, to avoid concentrating investments on a single sector or asset class.
data-start=”4507″ data-end=”4510″ />✔️ The insured must have the possibility to adjust investments according to economic conditions.

📌 Example: A life insurance contract with unit of account should clearly specify whether the capital is guaranteed or not, and indicate the risks involved.

📌 4. Sanctions for non-compliance

Insurers and fund managers who do not comply with financial regulations face penalties.

📌 Example: In 2022, some insurers were sanctioned for misinforming their clients about the risks of unit of account.

📌 Different Types of Unit of Account and How They Work

Unit of account (UC) supports are integrated into multi-support life insurance contracts. Unlike guaranteed euro funds, their value fluctuates with financial markets, which can generate attractive returns but also involves a risk of capital loss.

1. Types of available units of account

UCs enable investing in several categories of assets:

• Stocks 📈 : They offer high potential returns but also significant volatility.
• Bonds 💵 : More stable, they generate fixed income in the form of interest.
• SCPI (Sociétés Civiles de Placement Immobilier) 🏢 : They allow indirect investment in rental real estate.
• OPCI (Organismes de Placement Collectif Immobilier) 🏠 : More flexible than SCPI, combining real estate and financial assets.
• ETFs (Exchange Traded Funds) 🌍 : These index funds replicate market performance (e.g., CAC 40).

2. How do units of account work?

UCs do not guarantee the invested capital. Their value evolves based on the performance of underlying assets. For example:

• A stock fund rises if stock markets grow 📈.
• A bond can decrease in value if interest rates go up 📉.
• A SCPI generates rental income but may be impacted by a decline in the real estate market.

Investors can adjust their allocations by performing arbitrages, i.e., shifting their savings between different supports.

3. What criteria to consider when choosing UC?

Several factors should be considered when selecting the best UC:

• Risk level : some UC are more volatile than others.
• Management fees : they can significantly reduce returns.
• Historical performance : even though it does not guarantee future results, it indicates management quality.

UCs are thus an excellent way to invigorate your life insurance but require a well-defined strategy based on your profile.

📌 Impact of economic cycles on securities in insurance

The economy plays a key role in the performance of securities in insurance. Financial markets are influenced by several factors, such as economic growth, inflation, and central bank decisions.

1. Influence of the economic situation

Economic cycles directly impact the profitability of investments in insurance:

• During growth periods, stocks are dynamic and offer attractive returns 🚀.
• During recessions, investors favor secure assets such as government bonds 🏦.

2. Impact of interest rates

Central banks (e.g., the ECB) adjust interest rates to control the economy.

• Interest rate hikes → bonds lose value, but new placements are more lucrative.
• Interest rate cuts → stocks are favored as borrowing costs decrease.

3. Financial crises and their effect on UC

It is therefore essential to adapt investments according to the economic context to limit risks.

📌 Best strategies for investing in securities within life insurance

Investing in securities requires an adapted strategy to your profile and investment horizon.

1. Define your investor profile

• Prudent 🛡 : Priority to bonds and guaranteed funds.
• Balanced ⚖️ : Distribution between stocks, bonds, and SCPI.
• Dynamic 🚀 : Mostly invested in stocks and ETFs.

2. Adopt effective diversification

Good diversification reduces risks:

• Geographical distribution : invest in Europe, the US, Asia.
• Different sectors : technology, energy, health, finance.

3. Monitor and adjust your portfolio

It is important to reevaluate investments regularly and perform arbitrages according to market changes.

✅ Conclusion

Securities in insurance offer an interesting investment opportunity for savers wishing to optimize their returns. However, they involve risks and require rigorous management.

📌 Before investing, it is essential to clearly define your profile, analyze fees, and choose a contract that suits your objectives. 🚀