In the coming years you would see a trend where insurance companies would be outsourcing the management of their account assets to external investment managers. Between the year 2002 and 2006 the outsourcing in this area increased from 56% to 68%.
As per David Holmes, Partner, Eager, Davis & Holmes:
Insurance company outsourcing is driven by a desire to earn higher returns, but with at least equal emphasis on portfolio diversification and risk management. The move toward outsourcing is not surprising in an era of 5% interest rates and an equity risk premium of roughly.
This trend is now visible across most of the asset classes and investment styles. With an increase in demand expected in the case of specialized fixed income mandates, within the next two years, twenty percent of the insurance companies are expected to outsource the mandates.
