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Europe’s insurers face business model shake up

Solvency II was another important factor driving insurers’ asset allocation considerations. Around 73% of insurers indicated that the forthcoming EU Directive is affecting the way they design investment portfolios as the taking of asset risk now requires appropriate risk-capital and a fuller understanding of the risks being taken.

Insurer business models and profitability were also reported to be under pressure from a structural shift away from guaranteed savings to unit-linked structures. SLI said about 43% of insurers stated they were unable to price new guaranteed investment products at competitive rates.

“European insurers’ business strategies and traditional business models are being fundamentally challenged due to the combination of the long-term low return environment, Solvency II and the ongoing need to deliver on promised guarantees,” said Stephen Acheson, executive director of Standard Life Investments.

“The survey highlighted a clear theme of insurers looking to outsource to the external asset management industry.  However, it also highlights a belief among insurers that the number of credible outsourcing partners is declining.”

Standard Life Investments had 69 insurance clients investing balance sheet assets in over 20 countries, representing assets under management of £137bn at 30 June 2015.

Part of the Bonhill Group.