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Hard-pressed European insurers invading territory of pension firms

02 December 2016

Pensions business offers insurers recurring income for generally less onerous capital implications

Read more: pensions insurance

Insurers in Europe are invading the home turf of pension companies, according to research house Cerulli.

Analysts at the firm claim insurers in the Netherlands, Sweden and the UK are expanding into pensions provision due to growing pressure from unaffordable historical guarantees on life policies.

Dutch insurers have been the earliest adopters of the Algemeen Pensioenfonds (APF), one of the country's prominent vehicles for workplace pensions. AEGON won approval from De Nederlandsche Bank for one over the summer.

Rival insurers aspiring to have their own included Achmea, ASR, Centraal Beheer, Delta Lloyd, and Nationale-Nederlanden.

In Sweden, branching into occupational pensions business offers insurers a welcome diversification of business.

Their regulator, Finansinspektionen, has boosted the attraction of such diversification until the end of 2019, by subjecting it to Solvency I, rather than to the more capital absorptive and generally stricter Solvency II.

In the UK, Cerulli finds that composite insurers are extending their activities in occupational pensions, in part to plug gaps left by a softening of individual life annuity sales since annuitization became optional for retirees in April 2015.

"Pensions business offers insurers recurring income for generally less onerous capital implications than those that come with traditional insurance products. There is also the attraction of diversification," said Justina Deveikyte, senior analyst at Cerulli Associates.

"For some insurers in the Netherlands, Sweden, and the United Kingdom, the temptation is proving too great,"

Cerulli’s experts reckon it is too early in some cases to tell whether insurers' expansionist tendencies will broaden or narrow opportunities for independent managers to run pension assets.

It notes, however, that the largest insurers--companies that tend to own in-house asset managers--are generally better placed to expand into pensions provision.

"That said, governance standards and the stipulations of pensions themselves should ensure not all asset management is brought in-house," added  Deveikyte.

"As long as doing insurance business remains tough, Cerulli expects Europe's €8.4trn (US$9.4trn) industry to see workplace pensions as a useful 'Plan B' to run in parallel to its mainstay."


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