Just as astute politicians can instinctively turn a crisis into an opportunity, so good fund managers should aim to benefit from the disruptions and restructuring that will play out in the European insurance sector over the next few years.

In some ways, these changes will be driven by the near meltdown of the financial system at the end of 2008. But demographic and economic factors are also playing a part, as European governments face up to the reality of unsustainable pension and healthcare costs.

Some European countries, such as Italy and France, face huge deficits relating to generous state pensions and this will force them to accept and encourage the privatisation of pensions and health insurance. Other countries, such as the UK, may have relatively austere state pensions, but have huge liabilities from unfunded public sector pensions. In both cases, public spending will be under pressure and governments will see an increased role for private provision as part of the solution. Partly, this will be on a voluntary basis, but in some cases, compulsion, or near compulsion, will be used to increase retirement provision. The introduction of personal accounts in the UK from 2012 is a case in point. Private sector employers will be required to auto-enrol staff into a pension scheme, which will lead to an enormous increase in the number of individuals paying into a private pension.



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