Insurers embrace outsourcing for investment diversification: Clearwater Analytics report
IDAHO, UNITED STATES — The 2024 Insurance Investment Outsourcing Report (IIOR) by Clearwater Analytics reveals a significant growth in the outsourcing trend within the insurance industry.
The report, now in its eleventh year, highlights that insurance assets under management (AUM) outsourced to external managers have reached $3.6 trillion, with over $900 million of consultant assets under advisement.
This marks a substantial increase from the $1.4 trillion in AUM reported in the first edition of the report in 2014.
Shift towards private assets, alternative investments
- Increase in Managers. Over the last three reports, 22 new managers have joined the IIOR, reflecting the growing interest in the insurance asset management business.
- Shift to Private Assets. Many new managers bring private credit and alternative capabilities, supporting the trend of insurers incorporating these strategies into their investment programs. Private asset classes have grown to $602 billion, up 40% over the last two years, while public asset classes have remained flat.
- Role of Investment Consultants. Investment consultants are becoming more prominent, helping insurers extend their investment strategies into private asset classes.
- Dominance of Public Fixed Income. Despite the rise in private assets, public fixed income continues to dominate outsourced assets, accounting for 70% of AUM reported.
“Insurer investment programs have grown in sophistication since the 2008 financial crisis and the prolonged low-rate environment convinced many insurers to look beyond investment grade bonds,” said Sandeep Sahai, CEO at Clearwater Analytics.
Complex investment landscape
“As investors diversify to increasingly complex asset types, they invest the time to understand these asset classes with the support of experts represented in our guide. We have seen increased alternative investments among the 800-plus insurance clients on the Clearwater platform and their money managers.”
Steve Doire, Strategic Advisor at Clearwater Analytics and owner of DCS Financial Consulting, added that the 7% YoY growth in the aggregate third-party insurance general account AUM “shows the market is growing in complexity and sophistication, and the readiness for investors to explore and capitalize on diverse investment options.”
The 2024 IIOR underscores the dynamic nature of the insurance investment outsourcing market, highlighting the increasing reliance on external managers to navigate the complexities of modern investment landscapes.
