John Dowdall, Silverfinch
"There are going to be winners and losers in the asset management industry as a result of Solvency II, and which group you end up in depends on how you respond to your clients' needs."
In addition, the report says, a new subset of the asset management industry will appear which will attract the lion's share of the trillions of pounds worth of European insurance funds under management.
Far from being just an imposition on the insurance industry, the new regulations, which require insurers to identify and list out underlying holdings, are as much of a burden on the asset managers who look after money for insurance groups. However, the regulations, which come into effect on 1 January 2016, also open up a significant opportunity to build assets. Insurers have to be able to look though fund holdings to detail their underlying investments, a task that only the asset manager can do on their behalf. The study, which was completed following discussions with hundreds of insurers and asset management groups, shows that insurers are likely to be attracted to those asset managers who have established processes in place already and who are prepared and best able to meet these new requirements.
Most significantly, Solvency II clearly incentivises insurers to start 'cleaning up' their asset books and consolidate holdings among fewer asset managers to reduce costs related to the new reporting regulations. With full look-through freeing up capital that can be invested in funds, this will likely lead to an influx of billions of pounds to those individual asset managers best prepared for the new rules when they come into effect.
Other key findings in the report include:
· Fund managers face a risk in relation to the secrecy of their investment strategies from the imposition of the new rules.
· As many as 68% of asset managers may be susceptible to breaches of proprietary information due to insurers investing in their strategies via competitor funds of funds.
· Asset managers will have to work closely together to allow insurers to fully look through to underlying holdings while at the same time protecting the security of their investment strategies.
· Asset managers will have access to unprecedented levels of information about their clients when the new reporting rules come into force.
John Dowdall, managing director of Silverfinch said: "There are going to be winners and losers in the asset management industry as a result of Solvency II, and which group you end up in depends on how you respond to your clients' needs. The impact of the regulations is immense and insurers have made their position very clear to us. They will only invest with those companies that can fully help them take care of their Solvency II responsibilities."
For the full report, please click here.