Solvency II: Asset managers “must understand insurers better”

Life_insurance_planAsset managers lack understanding about the needs of insurance firms, including the demand for data transparency, and this is holding up investment outsourcing, researchers said.

However, despite evidence of insurers running more investments in-house, outsourcing is increasing in markets throughout Europe, partly as a response to the Solvency II regulations, consultancy Cerulli Associates said.

But asset management firms must improve their understanding of the insurance sector and also allow insurers to see through to underlying holdings. They must also provide data transparency, and give insurers the “control they crave”, said Cerulli in a report called ‘European Insurance Industry 2017: Charting a Successful Path in the New Landscape’.

The lack of understanding forces insurers to manage assets internally, but many small to mid-size insurers do not have the ability to access certain asset classes they want, such as infrastructure and private debt.

"The increasing complexity of investments is also forcing insurers to outsource a higher proportion of their assets," said Barbara Wall, Europe managing director at Cerulli. "Smaller insurers cannot access infrastructure or real estate debt investments using their in-house capabilities and have to outsource these asset classes."

Cerulli’s report also said it was crucial for asset managers to know regional nuances, “because building a single product for the European insurance market will not work”.

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