The chairmanship of France's biggest insurer, Union des Assurances de Paris (UAP), hangs in the balance as the recently elected right-wing French government considers replacing Jean Peyrelevade, UAP's current chairman and a strong socialist supporter.

The French insurance market has been buzzing with speculation since Sept. 13 when five French newspapers reported that the government planned to move Mr. Peyrelevade to Credit Lyonnais, the loss-making state-owned bank. His planned replacement was said to be Jacques Fried- mann, a senior civil servant.Mr. Friedmann is a civil servant with no experience running an insurance company. That is nothing new, Mr. Peyrelevade admitted knowing very little about insurance just a few months before taking over at UAP in July 1988.

The leak reportedly came from the Matignon Palace, official residence of the French prime minister, Edouard Balladur. Over the past two weeks, the Matignon has steadfastly refused to comment on the reports. So has UAP.

But other interested parties, from French trade unions to stock market analysts, have filled the vacuum.

Michael Huttner, a European insurance analyst at Barclays de Zoete Wedd in London, said Mr. Peyrelevade was probably paying the price for his failure to gain a foothold for UAP in the German insurance market, Europe's biggest.

Back in 1989, UAP spent 14 billion francs ($2.47 billion) to acquire a 34 percent stake in Groupe Victoire, a private-sector French insurer, which controls the major German insurer, Colonia Versicherung.

The idea was that UAP should later swap its 34 percent stake in Victoire for a 50 percent stake in Colonia.

Mr. Peyrelevade negotiated for years with Victoire's parent company, Groupe Suez, to bring the deal about, but to no avail. Negotiations officially ended last December.

Mr. Huttner said that Mr. Peyrelevade's "head would have rolled long ago" if, as the chief of a privately owned company, he had invested 14 billion francs in a "non-performing asset" such as the Victoire stake.

Mr. Huttner attributed Mr. Peyrelevade's survival at UAP to the support of the former socialist government, which lost power in the spring.

If he goes, Mr. Peyrelevade will be one in a long line of political

appointees selected to head UAP who have been ousted following a change of government. UAP, one of the biggest investors on the Paris stock exchange, has had seven chairmen in the past 25 years.

By contrast, Assurances Generale de France, the country's second biggest state-owned insurer, has had only two chairman over the same period. AGF is less politically sensitive because it holds fewer strategic stakes in other French companies than does UAP.

The current French government has announced plans to privatize UAP. The company's position in the German insurance market would affect its value.

Mr. Huttner suggested that the stock swap giving UAP 50 percent of Colonia would be a condition for privatization. He questioned whether Mr. Peyrelevade was the right man for the job.