Chart of the Week - How outsourcing GAs has withstood rising investment yields...

Some asset managers might have lost sleep as interest rates leaped during 2022, for fear that the improving yields on core fixed income holdings in general accounts would now be enough for CIOs to 'retreat' to, insourcing management of the more familiar asset classes as they went.

Would CIOs rapidly cool to the idea of paying someone else to run assets giving them enhanced yields, if debt and IG credit could now 'do the trick' nicely? Would there be a wholesale yanking-back of outsourcing, a widespread cancelling of SLAs?

But the managers needn't have worried.

Each year Insurance Risk Data pores over SFCRs and other documents from insurers, plus discussions and interviews with CIOs, to find which asset managers are winning mandates for whom.

And admittedly this year we approached that task, for our annual research report - Insurance Investment Outsourcing Opportunities - EEA, UK & Switzerland 2024 - with some trepidation.

But in short, this week's COTW tells us (and you), well, we needn't have lost sleep, either.

It's a heatmap that shows how about 2,200 individual outsourcing arrangements, in which the manager winning the gig is named, are spread out across Europe by location of the insurer doing the outsourcing.

These arrangements benefit over 1,000 different managers of the portfolios being outsourced.

The HQs of those winning the work are truly spread worldwide, from London City offices to Hong Kong high-rises, Cayman LPs to Delaware LLCs.

Investment professionals are (still) being very much valued, and sought out, by Europe's insurance CIOs.

Yes, Insurance Risk Data outlines evidence in its outsourcing report of some CIOs who are stocking up on their bond holdings.

But often the CIOs are using fresh premium income flowing into their GAs to do that, or even rotating out of some of their existing bond holdings, crystallising losses along the way, to exploit higher reinvestment yields now on offer.

CIOs seem decidedly less inclined to offload the non-mainstream allocations they made via outsourcing partners, when core FI yields were just awful, to reinvest in better yields now.

And that is very good news for the global investment industry that earns part of its keep, by helping CIOs meet their employers' promises to policyholders.

And once you have over 2,000 cases of European outsourcing in one report, as well as analysing the trends and future trajectories for outsourcing business overall, you can sort the delegations by asset manager, and do a 'BlackRock heatmap', a 'GSAM heatmap', a 'NEAM heatmap' – well, you get the gist. (Such heatmap market intelligence about specific managers we will keep tucked neatly inside our report's pages.)

Also included on those pages are lists of the names of about 650 investment experts inside Europe's insurers - from CIOs to CFOs, investment committee members/chairs and portfolio managers. And there are sections in the report dedicated to what the reforms just published for the matching adjustment in the UK mean for outsourcing partnerships; and how best to tackle the €1trn general account of Europe's mutual and co-operative insurers; and how the sub-modules of the market risk SCR for standard formula groups have broken down, annually, all the way back to 2016.

We could go on.

In fact, we plan to go on - in a free webinar discussion we are holding on 12 October, where we will detail the key findings of our annual outsourcing report (see box out).

We would welcome you there – hopefully not having lost any sleep in the meantime, and ready to hear how, where and from which insurers, outsourcing of the GA remains a very rich opportunity for investment experts armed with the right market intelligence.

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