European insurers are seeking increasing assistance with their investment portfolios but at a slower rate than previously, according to a report by Cerulli Associates.
The study found that outsourcing is growing and creating more opportunities for external asset managers, but fee pressure will become a key challenge for the industry.
Insurers especially rely on outsourced expertise when it comes to foreign fixed income strategies, as well as certain income-generating alternative strategies. However, the study highlighted that most insurance firms are “comfortable” managing core investment-grade fixed income in-house.
According to Cerulli, it is expected that insurers’ outsourcing of investment management to non-affiliated asset managers will continue to grow, but at “a slower pace than in recent years”.
The report findings suggest that European insurance assets outsourced to third-party, non-affiliated managers stood at around €1.2 trillion at the end of 2018 — slightly more than 16% of the region’s total general account assets.
The findings also suggest that outsourced assets are set to grow to more than €1.5 trillion, or around 19% of total assets, over the next five years.
Justina Deveikyte, associate director in Cerulli’s European institutional research team and lead author of the report, said: “Increasing consolidation and greater focus on cost reduction will prompt some European insurers to increase their outsourcing of their core fixed-income portfolios.”
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