Intergenerational Risk Sharing in Life Insurance: Evidence from France

47 Pages Posted: 8 Nov 2017 Last revised: 24 Jan 2019

See all articles by Johan Hombert

Johan Hombert

HEC Paris - Finance Department

Victor Lyonnet

Ohio State University (OSU)

Date Written: May 31, 2018


We study intergenerational risk sharing taking place in one of the most common retail investment products in Europe---life insurance savings contracts---focusing on the 1.4 trillion euro French market. Using regulatory and survey data, we show that contract returns are an order of magnitude less volatile than the returns of assets backing the contracts. Contract return smoothing is achieved using reserves that absorb fluctuations in asset returns and that generate intertemporal transfers across generations of investors. We estimate the average annual amount of intergenerational transfer at 1.4% of contract value, i.e., 17 billion euros per year or 0.8% of GDP. While theory asserts that intergenerational risk sharing cannot take place in competitive markets because it relies on non-exploited return predictability, we show that: (a)~contracts returns are indeed predictable; (b)~investor flows barely react to predictable returns; (c)~observed fees offset the estimated gain from exploiting contract return predictability.

Keywords: Life insurance, intergenerational risk-sharing

JEL Classification: G20, G22

Suggested Citation

Hombert, Johan and Lyonnet, Victor, Intergenerational Risk Sharing in Life Insurance: Evidence from France (May 31, 2018). Paris December 2018 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: or

Johan Hombert

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351

Victor Lyonnet (Contact Author)

Ohio State University (OSU) ( email )

Columbus, OH 43210
United States

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