A sector in transformation — now more than ever

Where the market stands

Geopolitical reality is forcing Europe to an uncomfortable conclusion: our security relied on America, our energy supply on Russia and our manufacturing on China. It has become clear how vulnerable those dependencies are. Europe must therefore restructure its economy at high speed. At the same time the AI revolution is accelerating, while the United States restricts access to the most powerful AI models.

In the Netherlands, too, the economy is shifting from abundance to scarcity. Higher defence spending and an ageing population call for additional public funds, while natural gas revenues are disappearing. The inflow of young people into the labour market barely compensates for those retiring. To maintain our prosperity, the Netherlands will have to innovate radically and become more productive.

Within that field of forces, insurers and pension funds have to determine their position. The common thread of the past 25 years is clear: consolidation and cost pressure. AI is now accelerating that development, and larger players in particular can pool people, resources and data and so cut their costs substantially. For pension funds and administrators, the pressure of the Dutch Future Pensions Act (Wtp) comes on top of that. This makes the question unavoidable whether some organisations will still have sufficient scale — or even relevance — five to ten years from now.

Not only insurers themselves, but also the intermediary distribution channel has consolidated strongly — with private equity (PE) entering the market in force. PE has also long been active as a software vendor to insurers and funds. As a result, insurers increasingly deal — on both the revenue and the cost side — with parties that steer primarily on financial return. And year after year, PE’s position grows stronger.

Insurers and pension administrators are, in keeping with their role in society, generally risk-averse. But in the current climate that tends to hold them back rather than protect them. This reluctance has allowed the sector to consolidate at a measured pace for decades. The changes now emerging, however, demand a different pace. In summary:

• Geopolitics demands European sovereignty and dual safeguarding of critical processes.
• The Dutch macro-economy will reshape industries and increase the pressure on prosperity.
• AI will accelerate cost reduction, provided insurers have sufficient data and execution power.
• Private equity will further leverage its position of power as a software vendor and as the link to the end customer.

The choices needed now require boardroom courage — and the ability to take organisations along through far-reaching change.

Those who drag their feet in this market lose not only pace, but ultimately relevance too.