The macro environment for the insurance asset management industry

Sara Benwell: How will growing competition in the insurance asset management sector effect third-party managers ability to differentiate themselves?

Keith Skeoch: I feel that those asset managers that really understand insurance, perhaps having an insurance legacy, will still be able to differentiate themselves and add value for their insurance clients.

Sara Benwell: Will we see a rationalisation of providers in core investment areas and a growth in alternative asset classes and if so which ones?

Keith: I think that there will always be a place for good quality active management across the core investment areas and, therefore, for those asset managers able to provide it.

In the current low interest rate environment, which is a global phenomenon and likely to persist for a number of years, the alternative asset classes offer the possibility of attractive illiquidity premia and is clearly a growth area.

This is especially the case for private market debt, which is useful for matching insurers liabilities in a capital efficient manner.   

Sara Benwell: Will the pressure on costs trigger more consolidation equalling a thinning of the provider universe?

Keith: It feels inevitable that there will be more consolidation in our industry, driven by cost, regulatory and technology pressures, especially for those asset managers unable to differentiate themselves.

Sara Benwell: What could this mean for product choice?

Keith: I feel that this may not necessarily reduce product choice as the so-called “survivor” asset managers, of which there will still be a large number, will have broader and deeper product sets and capabilities.

Sara Benwell: The recent growth in interest in private markets is yet to fully materialise, but the potential looks promising.

Where will the early adopters focus their attention and could the long-awaited arrival money from insurers act as an economic stimulant in the face of political uncertainty?

Keith: Insurer interest in private markets is a global theme and offers real potential for insurance asset managers to invest for the long term in Environmental, Social and Governance (ESG) worthwhile projects.

It has taken time for insurance asset managers to build up their private markets capabilities and also for insurers to improve their risk modelling of these asset classes and the long-term stable insurance money is now arriving.

A focus of attention will be on private market assets with strong ESG and climate change credentials as insurers ramp up their investments in these crucial areas.  

Important information For Professional Investors Only – Not for public distribution. Investment involves risk. The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not a guide to future results. United Kingdom United Kingdom: Aberdeen Asset Managers Limited, registered in Scotland (SC108419) at 10 Queen’s Terrace, Aberdeen, AB10 1XL. Standard Life Investments Limited registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Both companies are authorised and regulated in the UK by the Financial Conduct Authority. GB-301019-102419-1