Insurers Depart Asset Management
Industry turning over keys to Wall Street firms post-crisis.
April 12, 2010
Insurance companies have long managed large pools of capital to back the promises they’ve made to policyholders. But in the aftermath of the financial crisis, reports the Wall Street Journal, some are handing asset management over to Wall Street firms such as BlackRock Inc., Deutsche Bank and Goldman Sachs Group.
Among those who have outsourced in part. are Swiss Reinsurance Co., which turned over the keys to it bond portfolio, and Allstate Corp, which transferred its stock-picking duties. Zurich Financial Services AG has parcelled out 70% of its portfolio.
While it’s a low-margin business for the money managers, they are building insurance practices. The insurance companies indicate that outsourcing allows for a leaner in-house investment strategy team. And money management firms aren’t the only ones picking up assets. Prudential Financial Inc. manages more assets for others than it does for itself.
It’s estimated that assets no longer managed in-house have climbed from just over $800 billion to almost $1.2 trillion since 2006. Still, that’s a drop in the bucket. There’s a lot of assets that haven’t trickled away: total insurance assets are $18 trillion.