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
Retail brokers accused of stealing bank business with little oversight
High-net-worth investors pile into dollar and commodity structures as PBoC loosens
Progress slowed by lack of standardisation and fear of triggering regulatory mandate
Low returns from traditional investments are driving Australia's pension industry to look more at alternative assets
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.