47% of European insurers to increase allocations to emerging market debt

Written by Michael Griffiths

23/07/2021

Forty-seven per cent of European insurers are expected to increase their allocations to emerging market debt over the next 12 months, according to a new report from Cerulli Associates.

Around one quarter will do so via their existing asset manager relationships, while another quarter plan to appoint new managers. However, Cerulli suggested that fewer smaller and mid-sized insurers will look to invest in emerging market debt strategies over the next year.

According to Cerulli’s latest report, European Insurance Industry 2021: Changing Investment Needs Are Generating Opportunities, 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.

Cerulli also found that French insurers place importance of value for money more often than their peers in other European markets, with insurers in the Nordic region and the UK emphasising the importance of good risk management and performance.

In the UK, around one-third of 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% said that they plan to invest via existing relationships with asset managers rather than new managers.

“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,” commented Cerulli director, Justina Deveikyte.

She added: “Asset managers that do not already have climate risk expertise should consider developing tools and services that help insurers model, analyse, and quantify their exposure to climate risks.

“Such capabilities will become a commodity, especially in markets where insurers have fallen behind on responsible investment.”

A total of 157 European insurance companies, representing nearly €3trn of European insurance investment assets, completed Cerulli’s insurer survey during April and May.

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