Asset Management

Asset Managers In Europe To Benefit As Insurers Update Unit-Linked Funds To Reflect The Greater Demand For Sustainable Strategies

Proportion of Article 8 and 9 unit-linked funds expected to grow by 15% over next two years

Cerulli Associates’ quarterly publication covers the most pertinent trends in asset management product development and distribution in major European markets including Italy, France, the United Kingdom, Ireland, Sweden, Spain, Belgium, Germany, Switzerland, and Luxembourg.

December 2, 2022, LONDON—Insurance firms in Europe are refreshing their unit-linked platforms with funds categorized under Article 8 or 9 of the Sustainable Finance Disclosure Regulation (SFDR)—a move that is creating opportunities for external asset managers, according to the latest issue of The Cerulli Edge—Europe Edition.

According to the research, the proportion of Article 8 and 9 unit-linked funds on insurers’ platforms in Europe is expected to grow by an average of 15 percentage points to 32% over the next 12 to 24 months.

“Insurers are updating their unit-linked fund platforms to reflect the greater demand for sustainable funds,” says Wouter Bakker, senior analyst. “In Europe, insurance firms outsource most of their unit-linked fund assets and are seeking external manager support to develop new Article 8 or 9 unit-linked funds.”

Some 46% of the U.K. insurers, 44% of the French insurers, and 42% of the Italian insurers Cerulli surveyed are seeking support from external managers.

Adoption Of Articles 8 And 9

Cerulli expects larger insurance firms to be quicker to adopt Article 8 or 9 unit-linked funds than their small and mid-sized counterparts. Insurers in Europe with assets under management (AUM) of €50 billion (US$51 billion) or more are expected to grow their share of Article 8 or 9 unit-linked funds by 17 percentage points to 36% in the next 12 to 24 months. In contrast, insurance firms with AUM of less than €10 billion are expected to grow the proportion of unit-linked funds that either promote environmental, social, and governance (ESG) characteristics or have sustainable goals as their objective from 13% to 27% over the same period, an increase of 14 percentage points.

In Europe, Article 8 or 9 unit-linked funds are available mainly in the Netherlands and the U.K. However, French, and German insurance firms expect to increase the volume of sustainable unit-linked funds—the French insurers anticipate increasing their unit-linked funds classified as Article 8 or 9 by 24 percentage points over the next two years.

In Europe, insurance firms outsource most of their unit-linked fund assets and are seeking external manager support to develop new Article 8 or 9 unit-linked funds...

The key sustainability themes that insurers are focusing on vary by market, but most insurers across Europe are considering incorporating renewables, climate change, and biodiversity themes into their unit-linked fund offerings. 66% of European insurers plan to search for renewable energy strategies to structure their unit-linked funds in the next 24 months. Green buildings, affordable housing, and the UN Sustainable Development Goals are themes that are not expected to receive much attention from insurers in Europe.

Nearly 80% of the large insurers expect to include climate change strategies in their unit-linked funds in the near future. On the other hand, smaller insurers in Europe are likely to focus less on the climate change theme and more on biodiversity loss and renewable energy strategies over the next 24 months.

Other Findings:

Blockchain exchange-traded funds (ETFs) suffered a setback amid this year’s market volatility, but with interest in thematic ETFs rising among European retail investors and the potential of blockchain technology yet to be fully explored, the future could be bright. Educating retail investors on exactly how to use blockchain ETFs as part of a wider portfolio mix will be crucial if providers are to attract more mainstream investors and reassure regulators.

The contrast between equity fund flows in 2021 and 2022 could not be more stark. However, there are some positive aspects: passively managed equity funds have performed significantly better than their actively managed counterparts so far and certain equity sectors have gathered net inflows. The equity sectors that have performed well include global equity income, which has had the greatest net inflows in 2022 so far, followed by thematic equity funds focused on climate change and infrastructure.




About Cerulli Associates
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Headquartered in Boston with fully staffed offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.