Experts say insurers are having greater focus on their investment portfolios
UK insurance companies are taking more investment risks in a bid to keep profits flowing in the soft market, according to a leading asset management firm.
Companies are also looking to soften the impact of risky investments – such as sub-prime backed bonds – by allowing specialist firms to supervise them, Ryan Stork, managing director of Black Rock investment management firm, said this week.
He added that recent volatility in global stock markets, as well as an increase in the complexity of asset classes, had led general insurers and reinsurers, in particular, to look beyond in-house portfolio management.
Stork said: “During the cycle downturn, many companies want the [investments] side of their balance sheet to work harder. In the majority of cases this means taking greater risks.”
Stork said his company was hiring new staff to deal with increased demand from insurance clients.
According to a report by financial services consultants Patpatia, the value of investments outsourced by European insurers could soar to $815bn (£404bn) by 2011. The European market is currently estimated to be worth around $165bn (£82bn).
Large UK insurance companies are beginning to either outsource risky segments of their investment portfolios or hire in specialists to manage their exposure to volatile markets,
Stork said small to medium sized companies were starting to outsource the entire contents of their portfolios.