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Third-Party investment management on the rise

According to the Insurance Asset Outsourcing Exchange, substantial growth has been seen in insurance companies’ use of third-party solutions in the past year.


According to new statistics from the Insurance Asset Outsourcing Exchange, substantial growth has been seen in insurance companies’ use of third-party investment management solutions in the past year.

This seventh annual “Insurance Investment Outsourcing Report – 2020 Edition” shows that 46 investment managers posted non-affiliated general account (GA) assets totaling $2.6trn on a global basis as of year-end 2019, up from $2.2trn the prior year.

Additionally, a “same sample” of investment managers reporting their non-affiliated insurance assets both at year-end 2019 and at year-end 2018 shows 19% growth over the course of the year on a global basis.

The report also includes the Top 10 rankings for insurance asset managers, with BlackRock leading the pack with $396.3bn in assets under management AUM), followed by Goldman Sachs with $249.6bn in AUM.

The Exchange says that high double-digit growth occurred despite headwinds from insurance industry consolidation and results from three factors:

* Several very large mandates sought third-party manager solutions in 2019, and found homes with investment managers well-equipped with the scale and services to meet the needs of large insurance companies.

* Insurers have significantly increased outsourcing to specialized investment mandate solutions over the past several years, particularly in specialized fixed income strategies and alternative investments, in both North America and Europe. These mandates are often funded with cash flow, and their growth has become more apparent in reported outsourced assets under management year over year.

* “Inorganic growth” has occurred over the course of 2019, including divestures such that assets formerly managed for affiliated insurance companies are now reported as non-affiliated, and from mergers/acquisitions between investment management firms or insurance companies.

“Insurance-focused investment managers have become a go-to solution for insurance companies in time of need,” the Exchange said in a statement. “The credit crisis of 2007- 2008 was catalyst to an unpreceded move toward third party insurance asset management. New mandates outsourced in 2010 were double the rate outsourced in 2008 on a global basis. Fueled by a persistently low interest rate environment, outsourcing continued at that high level through year-end 2019.”

Those interested in obtaining the full report can contact the Insurance Asset Outsourcing Exchange here.

This story first appeared in Reactions.

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