AG Insurance has expanded its Class 23 life insurance offering in Belgium with the launch of two new structured products. Target+ USD Sustainable Goals 2027 and Target+ 90 Sustainable Goals 2027, which are denominated in US dollars and euro, respectively, both have a term of 10-years and are linked to the Solactive Sustainable Goals Europe Index.

"By providing two products, linked to the same underlying but denominated in different currencies, we think that this is a good way to highlight the product in USD because we can show how much better the conditions are in dollar compared to the euro product," said Nicolas Nizet (pictured), product manager, market development invest, AG Insurance. "The USD product has full capital protection and much higher gearing compared to the euro product [170% v 110%]."

In July 2016 AG Insurance became the first Belgian provider to launch a Class 23 product denominated in US dollars. Since then the insurer has distributed four life wrapped US dollar products, in what it has been "a real learning curve", according to Nizet

"When you launch a dollar tranche for the first time, people immediately think about the exchange rate risk, but in fact, the financial conditions that are attached are much better as a result of the historical high spread between US dollar rates and euro rates, which is nearly 2% on the whole curve," said Nizet. "The maturity almost has this high historical spread, and we hope clients become aware of these good financial conditions and know that they can compensate for the exchange rate risk. That would be an evolution."

According to Nizet, with the first tranche it's difficult to "reach 100% of these people - you probably don't even reach 20%, because they are risk aware, they choose protection at the end of the product, either 90% or 100%, so they are really focused on volatility of exchange rates and they ignore the financial conditions".

However, step by step brokers and clients are becoming aware of the significant diversification effect, said Nizet. "I think there are two types of clients. There are clients who really understand the fact that you can diversify with better conditions in dollar and then there are the clients that are typically 'fans' of US dollar and will only buy the USD tranche of Target+," he said.

The underlying index of the two life insurance products, the Solactive Sustainable Goals Europe, comprises of 30 stocks of European companies that, through their products, services and behaviour, contribute to the realisation of the 17 goals for sustainable development of the United Nations. Sustainability and socially responsible investing (SRI) is an important theme for AG Insurance and its clients, according to Nizet. "SRI investing becomes main stream and we believe that an SRI approach can offer added value," he said.

"Still we have a pragmatic approach," said Nizet. "We like to have good financial conditions for our clients with an SRI approach added to it. If you have an SRI approach without good financial conditions I don't think that this would go through our filter."

The SRP Belgium database lists 115 live structured products from AG Insurance worth a combined €2.9bn distributed via the BNPP Fortis channel; 33 live structured products (€410m) distributed via the BPost Bank channel; and 31 live structured products (€240m) distributed via the insurer's own brokerage channel.

Click the link to view the index guideline.

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