Recently, the French government passed a law designed to provide the French economy with a more effective means of finance and to promote retirement savings, as well as employee stock ownership. The act – The Plan d’Action pour la Croissance et la Transformation des Entreprises (PACTE; Action Plan for Business Growth and Transformation) – “will facilitate access to diversified funding” and “provide companies with the resources they need in order to innovate,” according to the French government website. (1)
The law will “allow life insurance providers to invest in crypto-currencies and tokens without any limitation on the amount that can be allocated.” This is the first time life insurance carriers have been allowed to invest in cryptocurrencies. French insurers will now be able “to offer life insurance policies exposed to crypto-monies,” with the investments facilitated through specialized professional funds. (2)
In the US, life insurance carrier general investment accounts are limited by regulation to their equity investment exposure with the bulk of their general funds invested in fixed investments like bonds and mortgages.
Variable life policies in the US allow policyholders to invest their cash value directly into separate accounts that include equities, as well as other investment classes. Equity index universal life policies have credited returns tied to an index, often the S&P 500.
While equity markets represent a volatile investment, they are nowhere near as unpredictable as cryptocurrencies. For example, Bitcoin soared from just over $1,000 to almost $19,000 over nine months in 2017, then dropped in fits and starts, down to just over $3,100 a year later. Today, it has rebounded to just over $5,100.
The fact that cryptocurrencies are allowed to be included in an insurance policy investment is heralded as a coup by its proponents. But many still believe the “investment” is still just a tool for speculators because of the wild price swings and the ability for comparatively small purchases to roil the markets, as cryptocurrency trading is still tiny relative to other investments.
It will be interesting to look back at this day in ten years to see what effect this law had on cryptocurrencies – and life insurance investments.
- PACTE, the Action Plan for Business Growth and Transformation, https://www.gouvernement.fr/en/pacte-the-action-plan-for-business-growth-and-transformation
- New French law allowing life insurers to offer investments in cryptocurrencies, Ken Chigbo, FX Street, April 12, 2019