Israeli Insurance Agencies Eye Pension Fund Management Amid Market Shift

Major Israeli insurance agencies, which currently dominate the distribution of savings products, are exploring the possibility of entering the pension fund management sector. This potential shift could significantly alter the market's power dynamics, moving distributors from solely promoting products to also managing them. Profit Group, controlled by Assaf Benay and Shlomi Alberg, is reportedly considering establishing its own pension fund company, potentially pioneering this trend. However, industry experts are divided on whether other large agencies will follow suit.

The economic incentive is substantial. In 2025, insurance companies and institutional bodies paid out 13.2 billion shekels in commissions to licensed distributors, a 10% increase from the previous year, according to the Capital Markets Authority. Of this, 3.14 billion shekels were specifically for pension and provident funds, marking a 19% surge. This highlights the growing influence of distribution channels.

Some leading agencies are reportedly seeking more than just distribution fees, aiming to capture a share of the management fees paid by savers to institutional bodies. While there's no explicit regulatory ban on combining distribution and management, an agency would need sufficient capital, investment management capabilities, and appropriate oversight systems to obtain a management license. If successful, these agencies could benefit from both management fees and reduced distribution costs for their own products.

Industry insiders suggest Profit Group meets the necessary requirements and anticipates no significant obstacles to approval, viewing this as a strategic, long-term move. They believe the pension market's continued inflow of deposits can accommodate new, profitable players. However, a widespread move by independent agencies to establish management companies is considered unlikely, especially given the high prices insurance companies have recently paid to acquire agencies.

Profit Group's ambitions extend beyond this; they previously showed interest in acquiring a controlling stake in Altshuler Shaham. One agency executive noted that while there's no fundamental barrier for well-capitalized agencies to establish pension management firms, the decision by Profit Group is a sound entrepreneurial one, allowing them to become both producer and distributor. Such an agency could potentially direct 20% to 30% of its distribution activities to its own pension fund.

In a contrasting move in 2023, the Ministry of Finance proposed limiting insurance companies' acquisition of distribution agencies, exploring conflicts of interest when entities both produce and distribute savings products. However, a final report in January 2025 did not recommend ownership restrictions, instead suggesting changes to agent compensation models and enhanced disclosure of ownership ties. Consequently, insurance companies retained their ownership of distribution agencies.

Profit Group's initiative may not be representative of the broader agency sector. Unlike typical agencies, Profit Group has a history of attempting investment management ventures, including a past unsuccessful attempt with Migdalor Investment House, which led to its delisting from the stock exchange. Currently, Profit Group manages approximately 700 million shekels in investments and hedge funds, with experienced institutional market managers.

Other large agencies, like Talpiot, led by Reuven Tiyutani, have considered creating savings management arms but decided against it, prioritizing objectivity towards clients. Companies like Cali and Gur Group are also major independent agencies, and IBI-controlled Four Seasons could theoretically establish a pension operation, though its investment house IBI, despite its size, does not currently manage pension funds.

The success of Ayalon Insurance's recent re-entry into the pension market, attracting about 2.2 billion shekels in assets within two months primarily through its agent network and incentives, demonstrates the power of distributors. While Ayalon is an insurance company, not an agency-turned-manager, its rapid growth underscores how agents can direct substantial funds. This success illustrates the business advantage for large agencies: earning management fees in addition to distribution commissions.

Ayalon's pension operations are slated to merge with Altshuler Shaham's pension activities following WeSure's acquisition of Altshuler Shaham's pension company. A key condition for Ayalon was maintaining a separate agent operation, highlighting the continued reliance of insurance companies on independent agents.