Surrender freeze (Article 49 of the Sapin II Act)
The power granted by the Sapin II Act of December 9, 2016 to France's High Council for Financial Stability to suspend or cap life insurance surrenders in order to protect financial stability.
Article 49 of the Sapin II Act, codified as Article L. 631-2-1 of the French Monetary and Financial Code, allows the High Council for Financial Stability, on a proposal from the governor of the Banque de France, to temporarily suspend surrenders, delay payments or restrict switches on life insurance policies. The measure lasts three months at most, renewable, and may target some or all insurers when serious threats weigh on financial stability. It addresses mass lapse risk: if market rates rise sharply, policyholders may try to leave euro funds backed by old bonds, forcing insurers to sell at a loss and spreading the crisis. The mere existence of this power is an underwriting and advisory fact, since it makes the liquidity of life insurance conditional in a crisis. It has never been used to date.
Signed into law on December 9, 2016, the act was passed when French life insurance assets exceeded 1,600 billion euros, mostly in euro funds, making it the country's most concentrated pool of financial savings in a single type of product.
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