More insurers outsource asset management

Insurers are increasingly seeking assistance in managing their investments, with many choosing to outsource their asset management function to third party specialists. As a result, many asset managers now view insurance as a distinct business line with unique requirements, according to research by boutique consultancy Patpatia & Associates.

While outsourcing in this field has been happening for some time, asset managers have been rather ad-hoc in their approach towards insurers, according to Bill Limburg, senior associate at Patpatia & Associates. But that is now changing.

“Asset managers are now approaching the insurance industry in a much more formal way and treating it as a business model,” he said.

One reason for this is that insurers’ needs can be very different to those of other clients and asset managers are increasingly tailoring their solutions to match these needs.

“In terms of marketing and client support, asset managers need to be able to speak directly to insurers and that requires specific knowledge of the insurance sectors’ needs,” he said.

Limburg said that this is a sea change for asset managers, many of whom have not been customer focussed in the past. But some have moved faster than others to recognise this and give insurers what they want.

“Some of the more established players have always been good but some of the newer entrants to the market are adopting a much more disciplined approach,” he said.

The report also found that, as a result of the challenging economic environment, insurers are moving towards non-traditional strategies in fixed income securities such as bank loans and commercial mortgages, as they search for new sources of yield.