An increasing number of insurers in Europe are seeking to deepen their relationship with asset managers with the aim of securing additional services. Such strategic partnerships are expected to focus on responsible investing and the assessment of climate risks, Cerulli Associates says.

In a new report on the European insurance industry, Cerulli also anticipates more opportunities for asset managers in markets where insurers’ allocations to private markets are still limited.

“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 Cerulli director Justina Deveikyte. “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. They place importance on value for money more often than their peers in other European markets.

On the other hand, insurers in the Nordic region and the United Kingdom emphasize the importance of good risk management and performance, the report says.

Around one-third of the UK 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% say they plan to invest via existing relationships with asset managers rather than new managers.

According to the report, 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, while 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 favour large asset managers with established brand names and strong servicing capabilities and platforms,” says Deveikyte.

Insurers appreciate asset managers that offer solutions that fit their investment parameters rather than just showing what they have and pushing their products. They also 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 Covid-19 pandemic. They are confident that these managers can look after their assets through different market cycles, and so they plan to award these managers additional mandates.