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Outsourced insurance general account assets reach USD1.2trn, says Cerulli Associates

Outsourced non-affiliated insurance general account assets reached USD1.2 trillion in 2013, and will account for 23 per cent of total insurance general account assets in 2014, according to research from Cerulli Associates.

"Insurance general account assets overseen by outside institutional asset managers stand at about USD1.2 trillion, which is small relative to the addressable market size of other institutional channels," says Alexi Maravel, associate director at Cerulli. "However, insurers have many incentives right now to seek new asset classes and strategies, so there is certainly an opportunity there for institutional asset managers."
Cerulli's new report, Insurance General Accounts: Opportunities in an Underserved Market, assesses the management of insurance general account investment portfolios in the US and insurance companies' increasing interest in outsourcing investment functions to institutional asset managers.
The report examines the unique nature and constraints involved in managing insurance company balance sheet assets, outlines the evolution of insurers' asset allocation decisions over recent years, and analyses what changes may result in the movement of billions of dollars in the coming years.
"Relative to declining or lower growth areas such as corporate defined benefit plans, the growth of insurance general account assets continues to be attractive to asset managers," Maravel says. "The pace of new outsourced investment mandates has come in fits and starts in recent years, but we expect solid growth in assets going forward as insurers diversify their investment portfolios away from investment-grade fixed income."
Given that this is a growing area of institutional asset management with relatively few established players compared to various types of retail asset management, it is not surprising that many in the industry see the untapped potential in managing insurance general account assets.
"The largest third-party managers of insurance general accounts oversee about USD100 billion and above in insurance assets, but much of the growth in assets will be in managers below USD100 billion in assets under management," Maravel adds.
Cerulli believes asset managers should invest the time in understanding insurers' internal investment teams and processes, as this will be essential to getting and retaining insurance assets under management.
Compared to other institutional clients, asset managers should plan for a significant investment of resources in exchange for stable long-term assets under management, as insurance general account assets are estimated to last 10 to 15 years.

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