Third-Party Investment Management Assets Expand 15% Over 2021
BOISE, Idaho – July 11, 2022 – Clearwater Analytics (NYSE: CWAN), a leading provider of SaaS-based investment accounting, reporting, and analytics solutions, and The Insurance Asset Outsourcing Exchange, today announced the publication of the 2022 Insurance Investment Outsourcing Report. This ninth annual report finds continued substantial growth in insurance companies’ use of third-party investment management solutions.
Fifty-eight investment management firms report third-party general account (GA) assets totaling $3.4 trillion on a global basis as of year-end 2021. This compares with forty-nine managers reporting $2.9 trillion in last year’s 2021 Edition, an increase in global assets under management (AUM) of 15%. Regionally, North America AUM posted 18% growth, Europe/UK posted 10%, and APAC 14%.
Behind the numbers
The double-digit asset increase results from insurers seeking to leverage the scale, services, and specialized expertise offered by third-party investment management firms. David Holmes, founder of the Insurance Asset Outsourcing Exchange, observed “growth occurred despite headwinds from insurance industry consolidation and challenges of COVID.”
According to Exchange data and analysis, three factors contributed to the past year’s AUM increase:
- Large insurers continued outsourcing multi-billion core fixed income mandates. These assets found homes with investment managers well-equipped with the scale, services, and range of investment solutions to meet their needs.
- Insurers continue to increasingly seek specialized investment mandate solutions. The Exchange’s Insurance Asset Tracker database logs increased outsourcing in private placements (both debt and equity), specialized fixed income strategies, public equities, and in particular, alternative investments. These mandates are often funded with cash flow, and their AUM growth has become more apparent in reported outsourced AUM year over year.
- Mergers and acquisitions have altered insurance industry demographics. Very large insurance companies are growing in number and AUM at the expense of smaller insurers. This demographic change favors both large multibillion-dollar awards to managers offering services and scale, and increasing diversification to specialist third-party managers and those with broad strategy expertise.
Alternative investments third-party management up sharply
Insurers’ outsourced investments to alternative investment managers have increased sharply in recent years. New mandates in alternative investments reported to the Insurance Asset Outsourcing Exchange’s Insurance Asset Tracker database comprise 24% of all new mandates in 2021, up from 18% in 2020, and 14% in 2019. Private debt and private equity comprise most of the alternatives category. Clearwater Analytics has seen similar trends in insurer assets on their multi trillion-dollar investment analytics, reporting, and accounting platform.
“Across our client base, we see material growth, with most investors recently increasing their allocations by more than 25% in non-traditional asset classes such as bank loans, private placements, commercial mortgages, and private funds/LPs with a variety of underlying strategies,” said Scott Erickson, President, Americas and New Markets at Clearwater Analytics.
Steve Doire, Head of Clearwater Analytics’ Strategic Client and Platform Advisory, added, “Insurers of all sizes are considering new asset classes but outsourcing that strategy to trusted advisors with scale and expertise across these specialty classes. As alternative investments increase, so does the complexity of the accounting, which is where Clearwater further enables efficiency.” For more information on the key findings in this report and to participate in upcoming webinars and information sessions, visit Clearwater’s website here.