Insurance Companies in Singapore Boost Use of External Asset Managers

Insurance companies in Singapore are increasingly turning to external asset managers for enhanced investment oversight and reporting, according to a recent study by Clearwater Analytics Holdings, Inc. The survey, involving insurers managing approximately $1.04 trillion in assets, revealed that on average, 34% of portfolios are outsourced. Every participating company uses external management for a portion of their investments, with this figure ranging from 24% to 45%.

This surge in the use of external managers is expected to continue, with 63% of insurers planning expansion in this area, contrasting with 26% who intend to internalize more assets. The primary motivation for insurers is achieving enhanced portfolio control and transparency, rather than merely cutting costs or addressing internal expertise deficits.

However, reliance on third-party managers amplifies challenges related to data management, with 92% of insurers facing difficulties in accessing and utilizing growing volumes of inconsistently formatted data. Critical issues include data integration, coverage, and consolidation. Coupled with tightening regulatory standards, insurers must meet stringent guidelines related to stress tests, solvency disclosures, and risk reporting, prompting upgrades in asset-liability management frameworks and technology investments.

The report suggests that over half of the insurers plan to increase their use of data analytics in the coming year. Additionally, 55% aim to incorporate artificial intelligence and machine learning tools to manage complex datasets more efficiently. This trend towards external management aligns with a broader move toward portfolio diversification, with 84% of insurers intending to ramp up private market investments from 20% to 36% over the next five years.

In response, insurers are reassessing their workforce and processes, hiring more risk specialists, and investing in digital solutions to replace labor-intensive manual methods like spreadsheets. As they outsource more operational tasks, insurers are leveraging technological advancements to improve transparency when working with external managers on complex assets. However, managing fragmented data streams from increased outsourcing remains a significant challenge.