Monetary Policy and Life Insurance Profitability: Bancassurance’s Edge in a Low-Yield World

This paper examines the effects of monetary policy on the profitability of life insurers during the prolonged low-interestrate period, leveraging a novel dataset of 31 leading French insurers from 2009 to 2018. Following supervisory practice and business-model criteria, we classify firms into bancassurers (insurance subsidiaries of banking groups) and non-bancassurers (the rest of life insurers governed by the French Insurance Code). Our central contribution is to document the income channel for life insurance. Monetary policy easing boosts profitability, but the adverse effect of the low-yield era operates through the spread between portfolio returns and credited (guaranteed) rates: as this guaranteed-yield spread widens, the gain from easing attenuates. We show that this mechanism differs materially across business models. Bancassurers reduce credited rates more rapidly than peers while maintaining above-average premium growth, thereby dampening the income channel’s drag and sustaining margins. Portfolio choices reinforce this advantage: bancassurers’ profitability increases with higher equity shares, in contrast to nonbancassurers, consistent with more diversified portfolios that smooth returns. Taken together, the results reveal pronounced heterogeneity in how life insurers adapt to monetary easing and underscore the importance of business model for the transmission of monetary policy to non-bank financial intermediaries.