Société Générale / Risk report 2021 - Pillar 3 2020

2 RISK FACTORS RISK FACTORS | SOCIETE GENERALE GROUP | PILLAR 3 - 2021 23 RISKS RELATED TO INSURANCE ACTIVITIES 2.2.6 2.2.6.1 A deterioration in market conditions, and in particular a significant increase or decrease in interest rates, could have a material adverse effect on the life insurance activities of the Group’s Insurance business. In the first half of 2020, the Group’s insurance activities represented net banking income of EUR 0.9 billion, or 4% of the Group’s consolidated net banking income. The Group’s Insurance Division is mainly focused on Life Insurance. At 31 December 2020, life insurance contracts registered outstanding amounts of EUR 126 billion, divided between euro-denominated contracts (68%) and unit-linked contracts (32%). The Group’s Insurance business is highly exposed to structural interest-rate risk due to the high proportion of bonds in the euro-denominated funds in its life insurance contracts. The level of and changes in interest rates may, in certain configurations, have a material adverse effect on the results and financial position of this business line. With its impact on the yield of euro-denominated contracts, a prolonged outlook of low interest rates reduces the attractiveness of these products for investors, which can negatively affect fundraising and income from this segment of the life insurance business. A sharp rise in interest rates could also degrade the competitiveness of the life insurance offerings in euros (compared with bank savings products, for example) and trigger significant repurchases and arbitrage operations by customers, in an unfavourable context of unrealised losses on bond holdings. This configuration could affect the revenues and profitability of the Life Insurance business. More generally, a pronounced widening of spreads and a decline in equity markets could also have a significant negative effect on the results of the Group’s life insurance business. In the event of a deterioration in market parameters, the Group could be required to strengthen the own funds of its insurance subsidiaries to enable them to continue meeting their regulatory capital requirements.