Insurance Risk Data launches sixth annual insurer outsourcing report

Insurance Risk Data is today launching its sixth annual research report on the delegation of investing duties by Europe's insurers, Insurance Investment Outsourcing Opportunities - EEA, UK and Switzerland, 2024.

The 350-page report analyses how, where and to which managers insurers outsource investing of their general accounts (GA) and unit-linked offerings, and includes various details of over 2,000 acts of delegation, between about 1,200 insurers in Europe including Switzerland and the UK and more than 500 different managers.

Tables detailing these acts of delegation run across about 130 of the report's pages.

Phil Manley, director at Insurance Risk Data, said the hike in yields "has certainly not dampened the desire, nor the need, of Europe's insurance CIOs to outsource investment duties...across the spectrum of asset classes".

The research offers a timely explanation and examination of the latest proposals to reform the matching adjustment (MA) for UK life firms, released late last month. It outlines ways managers can respond to those recommendations in a way that helps build new relationships, or strengthen existing relationships with chief investment officers (CIO) at the 18 MA users whose combined MA portfolio was worth an estimated £290bn ($429bn) in 2022. This places the report among the first comprehensive research responses to the finer details of the planned reform.

Drawing on data held in Insurance Risk Data, the insurance data service from the publishers of InsuranceERM, the report also analyses allocations, investment risk-taking and outsourcing habits of mutual, co-operative, friendly society and association insurers spread across 21 European countries. The 375-member cohort identified and named in the report wields a combined GA worth €900bn ($954bn), of which nearly €200bn is identifiably outsourced. Notes on the investments at each mutual accompany the analysis.

A separate chapter of the report examines the enduring appetite Europe's CIOs have for foreign-currency investments – and commonly outsource investing abroad, to find them. Regulatory filings of undertakings allow the report to reveal which insurers wrote significant volumes of foreign-currency liabilities in 2022 - - whether that be UK CIOs buying US dollar assets, or German CIOs investing in sterling-denominated. Foreign-currency obligations potentially require more same-currency investments to back them, though depth of markets and returns also drive CIOs' hunger. How CIOs determine which foreign FX asset exposures to hedge, or to leave unhedged, is also analysed.

A breakdown of the market risk capital requirement at about 100 groups applying the standard formula to a combined €1.6trn GA, is extended back to 2016, to provide a lengthy data set by which to gauge how CIOs have 'spent' the capital budget afforded them each year under the Solvency II regime. The report analyses how CIOs allocated risk overall, by type and region of insurer, and by GA size-bands.

To aid outsourcing partners find the best contacts at insurers, the report names about 650 individuals making and monitoring investment decisions inside about 600 different underwriters – from CIOs to investment committee members, chief financial officers and portfolio managers.

The report's 278 exhibits are also set out in a full chartbook, with all underlying data.

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