Survey: Insurance Assets Outsourced to US Investment Managers Hit Record High

(June 3, 2011) — Insurance assets outsourced to US investment managers have increased to a record $1.75 trillion at the end of 2010, according to Insurance Asset Manager’s (IAM) newly-published annual survey of 53 firms in the field.

“The chief highlight is the continued strong growth in outsourced insurer assets, a continuation of the momentum that was triggered by the effects of the financial crisis,” IAM spokesperson Alex McCallum told aiCIO. “In the two years since the depth of the crisis, outsourced insurer assets have increased by 60%, to $1.75 trillion from $1.1 trillion.”

The study found that in 2010, both BlackRock and Deutsche Insurance Asset Management broke through the $200 billion level for insurer general account assets. BlackRock finished the year with $205 billion and Deutsche with $203 billion.

Meanwhile, Wellington Management Company came in at third place in IAM’s general account category ($82 billion), followed by Delaware Investment Advisors ($77 billion) in fourth place, and Conning & Co. ($76 billion) in fifth. State Street Global Advisors, GR-NEAM, Goldman Sachs Asset Management, PIMCO and JPMorgan Asset Management rounded out IAM’s top ten.

According to the study, of the $1.75 trillion in third-party insurer assets under management at year-end 2010, $1.2 trillion consisted of insurer general account assets, an increase of 9% compared with $1.1 trillion a year earlier. The subadvised assets total of $560 billion showed a 22% increase over the year-end 2009 figure of $460 billion. PIMCO was the leader in the subadvised category with $108 billion, followed by Wellington ($105 billion), BlackRock, Goldman Sachs and Deutsche.

Summarizing the findings, Richard L. Sega, Conning & Company’s chief investment officer, stated: “The rate of change in the markets is relentless. Investors and regulators are increasing their demands for sound risk and capital management. An insurer’s success depends not only upon a strong financial position and market agility, but also the ability to adapt their strategies to these changes, incorporate them into their investment portfolios, and communicate these things with clarity to all constituencies.”

A March report by Insurance Asset Outsourcing Exchange, which tracks newly outsourced investment mandates by insurance companies and investment managers, highlighted the spike in the number of insurers are outsourcing management to third parties. “Difficult financial markets as well as the slow economy continue to challenge insurance companies’ earnings,” David Holmes, Partner in the Louisville, KY-based consulting firm Eager, Davis & Holmes, said in a statement. “They have become more open to the notion that the outside expertise and resources of an investment manager or consultant can make a difference.”

The report, titled Insurance Asset Outsourcing Analysis, finds a record 290 investment mandates were outsourced to third party investment managers in 2010, up from 256 in 2009 and almost double the 149 reported in 2008. However, fewer large multi-billion dollar mandates were outsourced in 2010.