Insurers predicted to increase outsourcing of the management of investment assets

Expect more insurance companies to join the global wave of outsourcing of the management of general account investment assets, up to the tune of US$1.9 trillion by 2011, according to the asset management firm State Street.
According to a study cited in State Streets Vision 2007 paper on the global insurance industry, approximately 69% of insurance firms in 2006 outsourced a portion of their general account investments to unaffiliated asset management companies. In total, the amount outsourced in 2006 was pegged at US$805 billion.
But this figure is expected to increase by an additional US$1 trillion by 2011, according to State Streets report.
Recent activitysuggests that some companies are actively searching for arrangements that encompass the outsourcing of 100% of an insurers general account investment management and asset servicing tasks such as insurance accounting and reporting services to a single organization, the report says. This looks to be the beginning of a total lift-out solution trend in insurance company outsourcing.
Part of whats causing the trend, says State Streets report, is that many insurers lack the in-house investment and reporting expertise to properly handle newer alternative investments and products such as hedge funds.
As a result, insurance companies are more frequently turning to outside experts who offer specialized skill sets focused on improving returns and better managing investment risks. That leaves the insurer to focus more on its core competencies, the report says.