Insurance companies are increasingly turning to third-party asset managers to improve returns and manage risk, according to a new study by Swiss Re. As a result of the trend, insurers' alternative investment holdings in hedge funds are poised to grow by more than 10% annually in the coming years.Hedge funds have the potential to earn solid returns, in some cases at low risk, Swiss Re said, noting that insurers' worldwide holdings of hedge funds are estimated to be anywhere from $10 billion to $15 billion.
“The current investment environment requires insurers to place new emphasis on their asset management operations. Investment risk management - an area at which some insurance third-party managers excel - will become more of a priority for top management. In this environment, superior asset managers will have the opportunity, and the need, to distinguish themselves and prove their worth to clients,” the report said.
At the end of 2001, global insurance assets totalled approximately $11.5 trillion, of which 82% were held by life insurers. Currently, American insurers employ third-party managers to oversee $300 billion of investments. Insurers in Europe outsource about $140 billion of assets, although the region is now likely to outsource its asset management at a faster rate than the US, Swiss Re added.
More on Structured Products
Five dealers to launch Asia-focused platform in drive to boost margins
Taiwan insurers shun structured products amid low volatility and rates
Reflecting on a decade of highs, lows and changing focus within the industry
The highs and the lows of structured products over the past decade
Sign up for Risk.net email alerts
Nominated for two technology awards
Nominated for post trade technology award
Sponsored webinar: Collateral and counterparty tracking
Isda directors warn on fragmentation, access and liquidity - but expect problems to pass
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.