Leonteq and Swiss Mobiliar, Switzerland's oldest private insurance company, have signed an agreement to cooperate in the development of unit-linked pension products.
Pensions are expected to grow further as the Zurich-based independent technology and service provider continues its move towards financial technology, according to Sandro Dorigo (pictured), head of pension solutions at Leonteq. "The insurance industry is facing increasing pressure from all sides: increased capital requirements, a continued low interest rate environment, digitisation and a customer behaviour which still demands for high guarantees, but increased flexibility," said Dorigo. "Our platform provides cross-industry solutions for all parties: the insuree, the insurer and the guarantor. It is highly scalable and meets individual customer needs through its modular approach. Last but not least, long product durations (up to 50 years) stand for a predictable long-term revenue stream."
Swiss Mobiliar is planning to use Leonteq's platform to offer unit-linked life insurance products combining traditional guarantee-based components with other investment elements. Under the agreement, Leonteq will support Swiss Mobiliar in the development and implementation of a corresponding product offering. The initial product is expected to be available in the second half of 2016.
The aim of the cooperation agreement is to provide clients with "attractive, flexible, and safe investment strategies", but declined to comment on the details of the cooperation agreement or specific products, said Michèle Bergkvist-Rodoni, head of life & pensions at Swiss Mobiliar, in a statement.
Leonteq already drives digital pension solutions by providing a "highly automated" platform "to enable the creation of bespoke and flexible individual products' for clients," according to Dorigo. "The platform can help them design products in a flexible and timely manner while offering the possibility to reduce capital costs by assembling third-party guarantees. It also offers the option to fully integrate all relevant processes for the products in their own systems or flexibly decide to outsource complex, but rarely used processes to Leonteq's web platform."
The dedicated support function to insurance partners during conception and product development is a distinguishing feature of the platform, said Dorigo. "While the policies which have been created on the platform are reconciled on a monthly basis, any potential need to reallocate the individual investment portfolio is constantly identified and processed in a regular batch," said Dorigo. "The triggers for reallocations can be driven by capital market movements, by new client investments or by changed client objectives. Furthermore, customizing policies over the whole human life cycle, i.e. accumulation, evolution and decumulation offered on one product platform, could massively increase the asset retention rate and is a sustainable way to maximize client satisfaction for insurers."
Leonteq's platform currently processes more than 20,000 individual policies accounting for more than US$1bn in less than two hours, according to Dorigo. "The profitability of the platform for Leonteq is closely linked to assets under management, ie. the service fee is linked to assets," said Dorigo. "The concept of paying only for assets on the platform instead of paying an upfront fee is the key to success in the view of Leonteq as this model ensures a sustainable alignment between insurers and Leonteq. Only if the life insurance product is successful Leonteq will earn any fees. Hence, Leonteq aims at doing whatever the market requires to make each product on the platform a complete success."
The types of products, underlyings, payoffs and wrappers in this segment will "highly" depend on the country (amongst other factors due to the tax/regulatory environment) and the client segment of the partner, said Dorigo. "It is the clear objective of Leonteq's pension solutions to further increase flexibility in terms of payouts and wrappers whilst preserve scalability," said Dorigo. "However, insurance companies generally look for simple payoffs which retail customers can understand easily."
Swiss Mobiliar is active in all lines of insurance and has an annual premium volume of CHF3.5bn (US$3.2bn).
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