By Mike Foster
Insurers across Europe are reviewing whether to outsource control of their investments to third-party managers, according to investment consultants.
The opportunity is one of the biggest in the world. Insurers across Europe run portfolios worth €8.5 trillion.
Outsourced assets in the UK rose by 25% to £180 billion during 2012, equivalent to 19% of insurance assets, according to the Investment Management Association.
Ravi Rastogi, who leads Towers Watson’s insurance practice in Europe, Middle East and Africa, says insurers face uncertain economic conditions, tougher regulation and increased scrutiny.
They are reviewing investment cost structures, expertise, and decision-making procedures. He said action could each add 10 to 25 basis points to performance.
Rastogi said: "We are starting to see early signs of movement and increased demand, and we expect outsourcing to develop on a more comprehensive basis in the years ahead."
Insurers, according to Moody’s, will outsource to help diversify asset allocations away from sovereign bonds. Rastogi said they could consider using a broader credit range, derivatives, illiquid assets and equities.
Russell Lee, a principal at Mercer, also expects more outsourcing: "We are seeing a move in this direction. Insurers are developing teams capable of winning third-party business, or outsourcing investments," he said.
More consultants are being asked to advise insurers: "We’ve won three mandates in the last six months," said Lee. More managers are responding to the opportunity, he added.
Source Business Daily Africa
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