French Insurance Code
In forceI.-For commitments covered by 1° of Article L. 134-1, I of Article A. 132-4-1 applies as follows:
1° Where the technical rate used is not zero, the literary explanation referred to in 2° of I of article A. 132-4-1 also includes the indication that the interest rate is likely to change over the years, and that the mathematical provision may therefore vary upwards or downwards in the event of fluctuations in this interest rate. It also specifies that the insurance undertaking undertakes to commit to the number of units of the diversification provision, subject to the provisions of article R. 134-4, and only to a minimum value for these units. Finally, it should be noted that this provision is subject to fluctuations, both upwards and downwards, depending in particular on the performance of the financial markets.
When certain deductions cannot be determined when the draft contract, insurance proposal or notice is submitted, it is indicated in very clear lettering immediately after the table mentioned in article L. 132-5-2 that the surrender or transfer value does not take account of the said deductions, specifying when this is the case, also in very clear lettering, that the deductions are not capped in terms of the number of units in the diversification provisions.
2° By way of example, simulated surrender or transfer values for at least the first eight years are shown, taking into account charges levied in any respect whatsoever. The simulations relate to the entire surrender or transfer value and are based on explicit assumptions of a 25 bp per annum change in the discount rate, which remains greater than or equal to 0, and a change in the value of the diversification provision of at least 10% per annum. They present at least the following three scenarios:
-a fall in the value of the diversification provision associated with an increase in the discount rate of the mathematical provision ;
symmetrically, an increase in the value of the share of the diversification provision associated with a decrease in the discount rate of the mathematical provision; - stability in the value of the share of the diversification provision associated with a decrease in the discount rate of the mathematical provision;
-stability in the value of the portion of the diversification provision and the discount rate of the mathematical provision.
Immediately following each of the simulations mentioned in the first paragraph of this 2°, the full surrender or transfer value upon reaching the guarantee is mentioned.
The simulations may not take into account the impact of changes in the discount rate on the value of the diversification reserve. In this case, it should be noted that changes in interest rates are likely to affect both the mathematical reserve and the diversification reserve.
All the calculation parameters used for these simulations are mentioned. In particular, among the parameters assumed to be constant for the simulation, those that are likely to change over time are indicated.
It is also stated that the simulations presented are intended as illustrative examples that in no way prejudge actual market trends or the personal situation of the policyholder or member.
II - For commitments covered by 2° of article L. 134-1, simulations of surrender or transfer values for at least the first eight years are provided by way of example, including charges levied for any reason whatsoever. The simulations relate to the entire surrender or transfer value and are based on explicit assumptions of a variation in the value of the diversification reserve of at least 5% per year. They include at least the following three scenarios:
a fall in the value of the diversification provision;
-symmetrically, an increase in the value of the diversification provision;
-stability in the value of the diversification provision.
Immediately following each of the simulations mentioned in the first paragraph of this II, the full surrender or transfer value on reaching the guarantee is mentioned.
All the calculation parameters used for these simulations are mentioned. In particular, among the parameters assumed to be constant for the simulation, those that are likely to change over time are indicated.
It is also stated that the simulations presented are intended as illustrative examples and in no way prejudge actual market trends or the personal situation of the policyholder or member.
III - For commitments that do not include a surrender value under the conditions set out in II of article R. 134-8, I of article A. 132-4-1 does not apply.
IV.-1° Pour l'application du a du 2° de l'article A. 132-8 aux contrats mentionnés à l'article L. 134-1 :
a) The box mentioned in article L. 132-5-2 indicates whether or not the commitments giving rise to the creation of a diversification provision include capital guarantees at maturity and, if applicable, the percentage of sums paid, net of charges, guaranteed at maturity.
b) The following statement is inserted in the box:
"Amounts paid, net of charges, in respect of commitments giving rise to a diversification provision are subject to fluctuations upwards or downwards depending on financial market trends. If a guarantee is offered, it is at the maturity of the commitment. The contract may provide for this guarantee to be only partial. "
2° For the application of 4° of article A. 132-8 to commitments with no surrender value, the box mentioned in article L. 132-5-2 states:
The commitments cannot be surrendered for [number of years during which the commitments cannot be surrendered] years.
