European Insurers Are Looking for Fewer, Better Asset Manager Relationships

July 23, 2021 — London

Managers that can act as strategic partners are best placed to win insurance business across the region

Cerulli Associates’ latest report, European Insurance Industry 2021: Changing Investment Needs Are Generating Opportunities, shows that strategic partnerships are becoming more common as European insurers try to streamline their relationships with asset managers.

A variety of types of strategic partnership exist, but the most common involves supplying a range of additional services to insurers to help them manage their assets more efficiently. Cerulli expects an increasing number of partnerships to focus on responsible investment and the assessment of climate risks. Cerulli also anticipates more opportunities for asset managers in European markets where insurers’ allocations to private markets are still limited. Managers that have (or are in the process of developing) alternative investment platforms should seek to establish partnership agreements with insurers.

“Asset managers that do not already have climate risk expertise should consider developing tools and services that help insurers model, analyze, and quantify their exposure to climate risks,” says Justina Deveikyte, director. “Such capabilities will become a commodity, especially in markets where insurers have fallen behind on responsible investment.”

French insurers identify asset managers’ investment strategies, value for money, and client service as the three most important attributes they look for during manager selection. French insurers place importance of value for money more often than their peers in other European markets; insurers in the Nordic region and the U.K. emphasize the importance of good risk management and performance.

Around one-third of the U.K. insurers plan to increase their allocations to emerging market debt in the next 12 to 24 months and roughly 16% plan to increase their allocations to global investment-grade corporate debt. However, 75% said that they plan to invest via existing relationships with asset managers rather than new managers.

Across European insurers, 47% expect to increase their allocations to emerging market debt over the next 12 months. One-quarter will do so via their existing asset manager relationships; another quarter plan to appoint new managers. However, fewer smaller and mid-sized insurers will look to invest in emerging market debt strategies over the next 12 months.

“Asset manager selection processes are relatively similar throughout the European insurance industry and some insurers increasingly favor large asset managers with established brand names and strong servicing capabilities and platforms,” adds Deveikyte.

Insurers also appreciate asset managers that offer solutions that fit their investment parameters rather than just showing what they have and pushing their products. They prefer managers that offer access to their analyst teams. Several of the insurers Cerulli interviewed said that they have been particularly pleased with how some asset managers have handled various challenges during the coronavirus pandemic. As a result, they plan to award these managers additional mandates—the insurers are confident that these managers can look after their assets through different market cycles.

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