France - A.M. Best Company

Page 1

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Nominal GDP USD bn 2583.56Population mil 64.8GDP Per Capita USD 39,869Real GDP Growth % 1.8Inflation Rate % 1.2

Literacy Rate % n.a.Urbanization % 80.0Dependency Ratio % 59.2Life Expectancy Years 81.9Median Age Years 41.4

Insurance Regulator

Premiums Written (Life) USD mil 153,520Premiums Written (Non-Life) USD mil 88,083Premiums Growth (2016 - 2017) % -1.3

FranceGermanyItalySpainSwitzerlandUnited Kingdom

CRT-1CRT-1

Country Risk TierCRT-1CRT-1CRT-2CRT-2

Vital Statistics 2017

Insurance Statistics

Regional Comparison

French Prudential Supervisory Authority (ACPR) under Banque

de France

United Nations Estimates

Source: IMF, UN, Swiss Re, Axco and A.M. Best

Regional Summary: Western Europe•WesternEuropeisahighlydevelopedandaffluentregion.

The 28 countries of the EU accounted for approximately 21.9% of the world’s domestic product in 2016 and 21.6% in2017,afigurethatisprojectedtogrowto22.5%in2018.

•Growth has been driven largely by rising domestic demand duetogrowingconsumerandbusinessconfidence,lowerunemployment rates, and credit growth.

•The European Central Bank (ECB) has decided to end its three-year EUR2.4 trillion quantitative easing program by the end of 2018, although it did signal that any rise in interest rates before September 2019 was unlikely. The policy rate has been below 1.0% since July 2012 and has been at 0.0% since March 2016.

•Concerns include political instability in certain countries, ongoing uncertainty about Brexit and its potential implications,andbelow-trendgrowthandinflation.

Economic Risk Political Risk Financial System Risk

Country Risk Tier 1 (CRT-1) Very Low Level of Country Risk

Country Risk Tier 2 (CRT-2) Low Level of Country Risk

Country Risk Tier 3 (CRT-3) Moderate Level of Country Risk

Country Risk Tier 4 (CRT-4) High Level of Country Risk

Country Risk Tier 5(CRT-5)VeryHighLevelofCountryRisk

FranceCRT-1August 22, 2018Region: EuropeCountry Risk Criteria ProceduresGuide to Best’s Country Risk Tiers•TheCountryRiskTier(CRT)reflectsA.M.Best’s

assessment of three categories of risk: Economic, Political, and Financial System Risk.

•France is a CRT-1 country, with low or very low levels of economic,political,andfinancialsystemrisk.

•Over the last few years, real GDP growth has been constrained due to high levels of unemployment, labor inflexibility,andweakdomesticdemandgrowth.

•GDP growth was 1.8% in 2017 and is expected to reach 2.1% in 2018. The increase in economic growth will be driven by a rise in both domestic consumption and investment activity.

•A.M.Bestcategorizesthemajorityofcountriespicturedin the map as CRT-1 and CRT-2. Notable exceptions are many of the Eastern European countries such as Belarus, Romania, and Ukraine.

BEST’S COUNTRY RISK REPORT

Curacao

Cayman Islands Anguilla

BritishVirginIslands

St. Maarten

Zimbabwe

Zambia

Yemen Vietnam

Somoa

Venezuela

Vanuatu

Uzbekistan

Uruguay

United States

UnitedKingdom

U.A.E.

Ukraine

Uganda

TurkmenistanTurkey

Tunisia

Trinidad & Tobago

Tonga

Togo

Thailand

Tanzania

Tajikistan

Syria

Switzerland

Sweden

Swaziland

Suriname

Sudan

Sri Lanka

Spain

South Africa

Somalia

Solomon Islands

Slovenia

Slovakia

Singapore

SierraLeone

Serbia

Senegal

Saudi Arabia

Sao Tome & Principe

San Marino

St Vincent & the Grenadines St Lucia

St Kitts & Nevis

Rwanda

Russia

Romania

Qatar

PuertoRico

Portugal

Poland

Philippines

Peru

Paraguay

PapuaNew Guinea

Panama

Palau

Pakistan

Oman

Norway

Nigeria

NigerNicaragua

New Zealand

Netherlands

Nepal

Namibia

Mozambique

Morocco

MongoliaRepublic of

Moldova

Mexico

Mauritius

Mauritania

Malta

Mali

Malaysia

Malawi

Madagascar

Macedonia

Luxembourg

Lithuania

Liechtenstein

Libya

Liberia

Lesotho

Lebanon

Latvia

Laos

Kyrgyzstan

Kuwait

SouthKorea

NorthKorea

Kenya

Kazakhstan

Jordan

Japan

Jamaica

Italy

Israel

Ireland

Iraq Iran

India

Iceland

Hungary

Honduras

Haiti

Guyana

Guinea-Bissau Guinea

Guatemala

Grenada

Greenland

Greece

Ghana

Germany

Georgia

Gambia

Gabon

FrenchGuiana

France

Finland

Fiji

Falkland Islands

CanaryIslands

Azores

Reunion

Sumatra

Borneo

Taiwan

Sakhalin

Kuril Is

lands

NewGuinea

Tierra Del Fuego

South Georgia

Ethiopia

Estonia

Eritrea

Equatorial Guinea

El Salvador

Egypt

Ecuador

East Timor

DominicanRepublic

Dominica

Dijbouti

Denmark

CzechRepublic

Cyprus

Cuba

Croatia

Cote d'Ivoire

Costa Rica

Congo

Dem. Republicof Congo

Comoros

Colombia

China

Chile

Chad

Central AfricaRepublic

Cape Verde

Canada

Cameroon

Cambodia

Burundi

Myanmar

BurkinaFaso

Bulgaria

Brunei

Brazil

Botswana

Bosnia &Herzegovina

Bolivia

Bhutan

Benin

Belize

Belgium

Belarus

Barbados

Bangladesh

Bahrain

Bahamas

Azerbaijan

Austria

Australia

Armenia

Argentina

Antigua & Barbuda

Angola

Andorra

Algeria

Albania

Afghanistan

Western Sahara(Occupied by Morocco)

Montenegro

Isle of Man

Jersey

Guernsey

Monaco

Gibraltar

Seychelles

Russia

Hong KongMacau

Russia

Indonesia

Guam

Northern Mariana Islands

Wake Island

Marshall Islands

Federated Statesof Micronesia

Nauru

Tuvalu

CoralSeaIslands

New Caledonia

Norfolk Island

French Polynesia

Pitcairn Islands

Kiribati

Tokelau

AmericanSamoa

CookIslands

Niue

Curacao

Cayman Islands Anguilla

BritishVirginIslands

St. Maarten

Zimbabwe

Zambia

Yemen Vietnam

Somoa

Venezuela

Vanuatu

Uzbekistan

Uruguay

United States

UnitedKingdom

U.A.E.

Ukraine

Uganda

TurkmenistanTurkey

Tunisia

Trinidad & Tobago

Tonga

Togo

Thailand

Tanzania

Tajikistan

Syria

Switzerland

Sweden

Swaziland

Suriname

Sudan

Sri Lanka

Spain

South Africa

Somalia

Solomon Islands

Slovenia

Slovakia

Singapore

SierraLeone

Serbia

Senegal

Saudi Arabia

Sao Tome & Principe

San Marino

St Vincent & the Grenadines St Lucia

St Kitts & Nevis

Rwanda

Russia

Romania

Qatar

PuertoRico

Portugal

Poland

Philippines

Peru

Paraguay

PapuaNew Guinea

Panama

Palau

Pakistan

Oman

Norway

Nigeria

NigerNicaragua

New Zealand

Netherlands

Nepal

Namibia

Mozambique

Morocco

MongoliaRepublic of

Moldova

Mexico

Mauritius

Mauritania

Malta

Mali

Malaysia

Malawi

Madagascar

Macedonia

Luxembourg

Lithuania

Liechtenstein

Libya

Liberia

Lesotho

Lebanon

Latvia

Laos

Kyrgyzstan

Kuwait

SouthKorea

NorthKorea

Kenya

Kazakhstan

Jordan

Japan

Jamaica

Italy

Israel

Ireland

Iraq Iran

India

Iceland

Hungary

Honduras

Haiti

Guyana

Guinea-Bissau Guinea

Guatemala

Grenada

Greenland

Greece

Ghana

Germany

Georgia

Gambia

Gabon

FrenchGuiana

France

Finland

Fiji

Falkland Islands

CanaryIslands

Azores

Reunion

Sumatra

Borneo

Taiwan

Sakhalin

Kuril Is

lands

NewGuinea

Tierra Del Fuego

South Georgia

Ethiopia

Estonia

Eritrea

Equatorial Guinea

El Salvador

Egypt

Ecuador

East Timor

DominicanRepublic

Dominica

Dijbouti

Denmark

CzechRepublic

Cyprus

Cuba

Croatia

Cote d'Ivoire

Costa Rica

Congo

Dem. Republicof Congo

Comoros

Colombia

China

Chile

Chad

Central AfricaRepublic

Cape Verde

Canada

Cameroon

Cambodia

Burundi

Myanmar

BurkinaFaso

Bulgaria

Brunei

Brazil

Botswana

Bosnia &Herzegovina

Bolivia

Bhutan

Benin

Belize

Belgium

Belarus

Barbados

Bangladesh

Bahrain

Bahamas

Azerbaijan

Austria

Australia

Armenia

Argentina

Antigua & Barbuda

Angola

Andorra

Algeria

Albania

Afghanistan

Western Sahara(Occupied by Morocco)

Montenegro

Isle of Man

Jersey

Guernsey

Monaco

Gibraltar

Seychelles

Russia

Hong KongMacau

Russia

Indonesia

Guam

Northern Mariana Islands

Wake Island

Marshall Islands

Federated Statesof Micronesia

Nauru

Tuvalu

CoralSeaIslands

New Caledonia

Norfolk Island

French Polynesia

Pitcairn Islands

Kiribati

Tokelau

AmericanSamoa

CookIslands

Niue

Page 2

Economic Risk: Low•France’s economy, the second largest in the eurozone, is

experiencing a cyclical recovery, as GDP growth remains positive. Nevertheless, GDP growth continues to fall below expectations, indicating the need for additional structural reforms.

•Headwinds for France include rising trade tensions due to growing trade protectionist policies, ongoing uncertainty surrounding Brexit, aging demographics, and the potential foramisstepfromtheEuropeanCentralBankasitadjustsmonetary policy.

•Job growth accelerated in 2017, resulting in lower levels of unemployment for the year. The unemployment rate was approximately 9.4% in 2017 and is expected to decline further in 2018, to 8.8%.

•Theeconomyisdiversified,withlimitedstateinterventionin most sectors. However, the government maintains a strong presence in the defense, public transport, and power industries.

Political Risk: Low•France is a member of the EU and one of the original 11

countries to adopt the euro as its currency in 1999.

•President Emmanuel Macron, a member of the La République en Marche (REM) party, defeated the far-right candidate, Marine Le Pen, in the April 2017 presidential elections. In the recent parliamentary elections, REM securedanabsolutemajority,whichwillfacilitatethepassage of legislation and provide political stability.

•Macron has been able to pass legislation with regard to labor and tax reforms, which focused on lowering tax rates andincreasingtheflexibilityofthelabormarket.However,this has led to tensions with various union groups and has causedsignificantdisruptionstoairandrailtransportation.

•AdditionaleffortstoimproveFrance’scompetitiveness,including reforms of unemployment insurance, pensions, and a reduction in companies’ administrative burden, are likely to be undertaken in the near term.

Financial System Risk: Very Low•Since 2010, the Prudential Control Authority—the Autorité

de Contrôle Prudentiel (ACPR)—regulates the insurance and banking industries.

•The banking sector has bolstered its balance sheet considerablysincethe2008financialcrisis,doublingitscapital. However, the regulatory framework is still being strengthened,asbanksworktofinalizeaspectsoftheBasel III guidelines.

•Monetary policy, directed by the European Central Bank, has been accommodative towards growth and has materially decreased the government’s borrowing costs.

•Corporate debt levels have increased, which could become a vulnerability when interest rates rise. Authorities have limited banks’ exposures to individual large indebted corporations.

Economic Growth (%)

-4

-3

-2

-1

0

1

2

3

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Real GDP CPI Inflation

Source: IMF World Economic Outlook and A.M. Best

Political Risk SummaryScore1(best)to5(worst)

0

1

2

3

4

5International Transactions

Policy

Monetary Policy

Fiscal Policy

Business Environment

Labor FlexibilityGovernment Stability

Social Stability

Regional Stability

Legal System

FranceWorld Average

Source: A.M. Best

France

GDP Per Capita and Population

0

10

20

30

40

50

60

70

80

90

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

France Germany Italy Spain Switzerland UnitedKingdom

USD

Millions

GDP Per Capita Population

Source: IMF and A.M. Best

BEST’S COUNTRY RISK REPORT

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Page 2 of 2 August 22, 2018