The dilution of investment yields has reinforced risks for the industry such as a serious lapse risk if interest rates were to rise abruptly, financial losses for insurers who guarantee high technical rates compared to financial returns, or risks related to insufficient cost coverage. Among this quick review of the most salient characteristics of the environment in which insurers have been operating I would like to add that climate change risk has now become a reality and although insurers usually know how to deal with climate risks, including in extreme events, it is more than likely that further adjustments will be needed. Against this backdrop, French insurance companies have reacted in three main ways: lowering of paid interest rates in life insurance, development of alternative investment strategies  and  adaptation  of  their  traditional  business  model  including  an increased business diversification. As a result, for instance, unit-linked liabilities are increasing, and the profit-sharing payments for euro-denominated contracts are decreasing. However, I note that these payments remain significantly higher for mutual undertakings: they amounted to 2.3% last year while the French average is lower, and the reserves for deferred profit sharing have been strongly reinforced and amount to approximately 6% of mathematical reserves at YE 2017, which is 50% higher than the French average.
We have recently conducted a survey of the financial institutions to check their readiness to conform to the credit risk guidelines under the New Accord. I have been reported that many plan to be ready for the standardized approach, while others are working towards the IRB approach, this is a welcome news. More importantly, financial institutions have all started the effort to strengthen risk management in their respective institutions with some notable progress so far, and we look forward to more progress to come. I would like to take this opportunity to commend all of you for such efforts. After all, the BIS capital requirement only serves as a cushion of losses or failure of an institution whereas it is the risk management that reduces the chance of failure. The significant progress you have made in the area of risk management deserves our full support and commendation, particularly so as this is a very difficult time for the financial industries. Ladies and gentlemen, Coming back to the issue of preparation for the New Accord, one can see that significant challenges remain ahead. I will now turn to these challenges. First, the technical and infrastructure aspects. It is important to build up a deep understanding of the technicality of approaches and methodology underlying the New Accord. Moreover, it is critical to achieve in-depth knowledge of risk management and the impact of such developments on business model of the financial institution. Therefore the task ahead is very challenging, far beyond just acquiring software that would crank out numbers.