Best’s Special Report: Growing Number of Insurers Outsourcing Their Investment Management Needs

OLDWICK, N.J.--(BUSINESS WIRE)--The number of insurers outsourcing investments to asset managers continues to grow, particularly in the U.S. life/annuity (L/A) industry, according to a new AM Best report.

The newly issued Best’s Special Report, titled “Growing Number of Insurers Outsourcing Their Investment Management Needs,” also notes that more private equity/asset manager (PE/AM) companies have been investing in L/A insurers, and part of these deals can include the PE/AM company managing at least some of the assets despite many times not owning the majority of the insurance company.

“Annuity companies can provide that steady stream and have larger investment portfolios, making them attractive targets,” said Jason Hopper, associate director, AM Best.

According to 2024 NAIC data analyzed for the report, more than 43% of life/health (L/H) insurers relied on a single third-party investment manager to actively manage at least 10% of their invested assets, up from 32% in 2016. Similarly, the percentage of insurers using one or more unaffiliated investment managers to manage more than 50% of invested assets has risen steadily, to 35.5%, from 26.8% in 2016.

As PE/AM companies with significant investment expertise further ingrain themselves in the L/A market, many other companies have sought similar investment diversification to other asset classes in order to remain competitive and achieve adequate spread. However, in-house investment management teams may lack the resources for or significant expertise to invest in certain asset classes, which has translated to seeking outside investment managers.

Among the report’s other highlights:

• The investment shift by the L/A insurance industry to structured assets, private credit, and other alternative asset classes has led to a greater need for this investment expertise, which may not lie with traditional in-house investment management teams.

• Property and casualty insurers are more likely to use unaffiliated investment managers, but growth has been stagnant over the short term.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=356371.

To view a video related to this report, please visit http://www.ambest.com/v.asp?v=ambassetmanagers725&AltSrc=182.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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