More health insurers outsourcing investment management — AM Best
NEW JERSEY, UNITED STATES — An increasing number of health insurance firms are outsourcing investment management to third parties, according to a new report by insurance firm AM Best.
The report found that 40% of health insurers preferred to outsource portfolio management in 2022, up from 32% in 2016. The study looked at firms relying on external managers for over 10% of invested assets.
The report added that insurers allocating more than half their investments to third-party managers grew steadily to 33.4% in 2022, versus 26.8% in 2016.
According to AM Best, it is ideal for small insurance firms to outsource its services as it may lack certain skill sets to manage diverse asset classes.
“Alternative investments generally require more specialized investment management skills and are typically outsourced to asset managers specializing in such investment opportunities,” said Jason Hopper, associate director, AM Best.
“The significant increase in private credit investing by the insurance industry requires additional skills not always present in many smaller to medium-sized to smaller carriers.”
Other findings of the report show that U.S. life and health insurance companies reported having over $67.1 billion of invested assets managed by its top 10 fund managers at the end of 2022.
Also, the top 20 U.S. life and health insurers had nearly 70% of their invested assets, including assets managed by affiliated fund managers, managed by third-party fund managers in 2022.
Blackrock is the largest fund manager of the insurance industry, managing roughly $8.8 billion and over 13% of these assets are outsourced by the insurance industry. The firm is also the only fund manager that manages assets for more than 100 insurance companies.
