European Insurers Want Asset Managers to Work with Them as Partners

European Insurers Want Asset Managers to Work with Them as Partners
Managers should be building strong insurance teams and adopting a solution-based approach

April 2018, London. Cerulli Associates, a global research and consulting firm, conducted research into the insurance asset management sector for its latest report, The Cerulli Report—European Insurance Industry 2018: Embracing the New Normal, and found that insurers across Europe—particularly small and mid-sized ones—increasingly want solution-based partnerships with their key managers. With capital efficiency highly prized under Solvency II, keeping insurers informed of risk and capital consumption in their portfolios and tailoring products to reduce capital charges are top priorities for managers. More than half (56.3%) of the asset manager survey respondents said that developing capital-efficient products specifically designed for insurers is a high priority for them.

In recent times, some European insurers have been too preoccupied with Solvency II implementation to investigate new asset classes as thoroughly as they would have liked. Those that have adapted to their new regulatory burden may now have the internal bandwidth to be more proactive in their investment decision-making. As a consequence, the range of strategies on which insurers now request dedicated solutions is expanding. Many insurers now expect reporting add-ons, such as Pillar III tripartite templates, as standard and will often omit managers that fail to offer these functions from shortlists.

“Managers seriously courting insurer capital should aim to develop solvency capital requirement awareness on as broad a range of products as possible,” says Justina Deveikyte, associate director of European institutional research at Cerulli. “Those that can tailor capital-optimized products and provide a suite of risk control, reporting, and overlays will have a strong competitive advantage.”

The largest managers of insurance assets have sought to deepen existing relationships in recent years by hiring insurance-specific personnel in asset liability management, investment risk management, and dedicated relationship management. Some 31.3% of the asset managers Cerulli surveyed have an insurance team of 20 or more staff, another 31.3% have between seven and 12 people in their insurance teams, and 25.0% have between four and six people in their insurance teams. Nonetheless, the majority of asset managers (76.6%) plan to increase
their insurance teams over the next 12 to 24 months by hiring insurance specialists.

“Most insurance asset managers that have dedicated insurance solutions teams take a core-satellite approach; often centralized teams based in London oversee the development of custom solutions,” adds Deveikyte. “Managers taking this approach need to work as well-coordinated teams to ensure that they understand regional nuances well. The central team needs to share its expertise and observations regularly with colleagues in different cities to ensure that they are well informed during meetings with insurance clients.”

This and several other new findings make up Cerulli Associates’ European Insurance Industry 2018 report.

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