Increased pressure on state pensions in Europe creates an opportunity for insurers, as countries look to increase supplementary pension coverage, according to a study by Moody’s.

Moody’s stated that most Europeans still rely on the state pension in retirement, with just 23 per cent enrolled in an occupational scheme and even fewer contributing to private pensions.

It found that reliance on the state pension is high in Italy and France, where saving via occupational and private schemes is particularly low.

Conversely, Denmark and Switzerland have among the highest pension assets relative to GDP in Europe, thanks to quasi-mandatory asset-backed occupational schemes.

Over the past decade, asset-backed retirement savings in European supplementary pension schemes have increased to around USD 10trn.

The research stated that strain is being put on state pension systems as the share of the population aged over 65 has risen sharply in major European countries, reducing the ratio of workers to retirees.

“Concerns over old-age poverty are likely to trigger reforms that encourage rapid pension saving growth, despite political resistance. This would be positive for insurers, which, as expert risk and asset managers, can offer attractive savings and retirement products with risk transfer features,” the report said.

In particular, the research found that near-term opportunities are greatest in the Netherlands and the UK, where occupational pensions are well developed, and insurers are key defined contribution (DC) plan managers.

Meanwhile, reforms in Germany and Belgium could have a positive impact but may increase competition, while pension assets could decline in Spain because of changes allowing workers to extract some pension savings.

Moody’s said that policy reforms promoting real-economy investment could free pension asset managers to invest more in private credit, boosting their fee income and margins.

Currently, insurers earn modest fees managing pension assets, which are typically invested in bonds and equities, the research stated.

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