Spurred by Drive to Outsource, Insurance Asset Managers See Spike in RFPs in 2010

Investment managers are seeing an increase in the number of requests for proposals (RFPs) from insurance companies seeking third party services as the manager selection process evolves to meet increasingly complex investment needs.

(December 13, 2010) — Insurance asset managers are witnessing a higher volume of requests for proposals (RFPs) in 2010 as insurance companies retain third party expertise, according to a recent report.

David Homes, a partner at strategic consulting firm Eager, Davis & Holmes and Research Director for the Insurance Asset Outsourcing Exchange, has been tracking insurance companies’ use of third party investment managers including how they make manager selection decisions since the early 1990s, analyzing how insurance firms select managers. “We’ve seen that the insurance selection process has become more structured yet also more complex as investment needs have grown,” Holmes told aiCIO. He noted that the increase in the activity of RFPs reflects the heightened proclivity among insurance firms to outsource management.

According to Holmes, the spike in RFP activity leads to two conclusions. First, he said, with reasonable certainty, that the high level of insurance asset outsourcing seen in 2009 and 2010 will continue. Second, he expressed his confidence that insurance companies are more often using a structured RFP process when choosing a manager compared to the recent past. “Insurance companies are challenged by the current market and business environment,” Holmes asserted. “It’s become more apparent to them as a result of the credit crisis that they need expertise and resources that are not available internally.”

The study, sponsored by the Insurance Asset Outsourcing Exchange, showed that more than half (62%) of insurance asset manages included in the report are seeing more RFPs this year compared to 2009, while 30% report “about the same” level of RFPs and 8% report a decline. Furthermore, the study showed that insurance companies are increasing their use of investment consultants. “Because investment consultants typically use RFPs in the search process, they are contributing to the trend of increased RFP use,” explained Holmes.

The Exchange-sponsored survey was based upon responses of fourteen leading insurance asset managers, including four of the top five and ten of the top fifteen ranked on non-affiliated insurance general account AUM.

Editors’ Note: The top five managers ranked on unaffiliated AUM are BlackRock, Deutsche Bank, General Re–New England Asset Management, Inc. (GR–NEAM), Conning, and Wellington Management. Source: Insurance Asset Manager.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742