Almost a third of European insurance companies expect to reduce the number of third-party asset managers they work with over the next 12 to 24 months, according to new research.
This was more than five times the 5.5% of respondents anticipating an increase, as insurers preferred “strategic partnerships” instead, data analysis firm Cerulli Associates reported.
Only large insurers – those with more than €100bn in assets – foresaw a rise in their external asset manager tallies, the US-based company found.
The firm said its 2019 insurance research found that European insurance companies were seeking strategic partnerships with asset managers, with expertise being sought in particular to address increased oversight related to Solvency II and poor returns linked to low-yield assets in Europe, especially government bonds.
“Driven by a need to streamline oversight and find new ways of generating yield, insurers in Europe are consolidating their outsourced investment assets and leveraging the expertise of asset managers to a greater extent than ever before,” Cerulli Associates said.
While 29.1% of European insurers in the study said they expected to cut their external asset manager counts, 16.4% expected no change and 49.1% were unsure.
Cerulli said that larger insurers were better able to cope with the complex oversight associated with outsourcing to a larger number of asset managers.
Justina Deveikyte, associate director of European institutional research at Cerulli, said: “Although partnership-type engagement has been triggered by regulatory and economic pressures, the approach is most likely here to stay.”
Partnerships differed from traditional mandates in that insurers demanded a range of services, from governance and risk management to operations and bespoke product research, she said.
“Simpler oversight and greater investment returns are the two key goals of strategic partnerships,” she added. “We expect to see continued demand for riskier fixed-income and illiquid assets.”