Swiss Re, one of the world’s largest reinsurance groups, said that in response, insurance companies are increasingly turning to outside experts who offer specialist skills in asset management. Pressure on investment officers to manage operational risks and increased scrutiny from rating agencies is another factor.
Swiss Re estimates that US insurers employ third-party managers to oversee $300 billion of investments (from total investments of $3.9 trillion), while European insurers outsource around $140 billion of assets (from total investments of $4.5 trillion).
“In Europe, third-party asset management has a lower penetration than in the US,” said Swiss Re. “This is principally because European insurance asset managers must maintain a local presence, in some cases for legal reasons. This creates a cost barrier to entry, reducing competition between providers and strengthening the major European institutions who already have a foothold in the market.”