Asian insurers driving fund distribution growth: Cerulli
The insurance channel represents a “growing force” in mutual fund distribution in Asia ex-Japan, with assets under management (AUM) rising over the past few years to an estimated US$113.7bn by end-2016, representing 5.9% of the total, according to a new report.
According to global research and consulting firm Cerulli Associates, these assets posted a compound annual growth rate of 23.4% between 2012 and 2016. This was behind only independent financial advisors/platforms’ 154.0% –which grew from a low base, and is skewed by China’s sales of funds through e-commerce sites – and direct/tied agents’ 36.3% increase.
Cerulli said that future investment-linked product (ILP) growth looks promising in 2018. With most insurers across the region facing tighter capital adequacy requirements, some may place greater importance on ILPs, which pass liabilities on to policyholders and hence, create less burden on insurers’ balance sheets compared to conventional savings-type and protection products.
As a result some insurers are also increasingly exploring ILPs, simply to broaden their product ranges.
‘Attractive distribution channel’
For fund houses, insurers appear to be an “attractive distribution channel” Cerulli says. In it’s annual surveys, insurance companies consistently rank among the top three or four channels managers are keen to tap into. While insurers will unlikely match banks’ dominance soon, their growing importance is unsurprising, as managers seek to diversify distribution models.
However, although AUM via insurers has risen, the ILP opportunity in Asia varies according to demand in each market, and the degree to which insurers are open to third-party managers.
While most insurers – even those with their own asset management arms – do on-board third-party funds for their ILPs, others are more inclined to use their parent or sister firms’ products. However, this practice differs by market.
Competition for space on the ILP shelf is particularly tough for lesser-known brands. Thus, it helps to have some product differentiation to stand out from the crowd. Cerulli believes there is scope for greater underlying fund diversity among ILPs, given the heavy concentration in equities in most markets. Areas of opportunity include exchange-traded or passive funds, and possibly target-date funds in markets such as Singapore and Korea, to cater to aging populations, the report concluded.