Insurers Diversifying Assets in Search for Yield

Clearwater Analytics' 2021 Insurance Investment Survey Report reveals insurers are shifting into non-traditional assets, recruiting external managers, and deploying cloud-based reporting platforms

BOISE, Idaho, Oct. 27, 2021 /PRNewswire/ -- Clearwater Analytics (NYSE: CWAN), a leading provider of SaaS-based investment accounting, reporting, and analytics solutions, today announced key findings from its 2021 Insurance Investment Survey Report. Clearwater's survey report features data from more than 1,000 respondents, revealing insurers' continuing shift toward non-traditional assets, their growing use of external managers, and the related urgency around deploying cutting-edge technologies to provide transparency and trusted accounting data, among other findings.

With over $5.6 trillion in total assets on its SaaS platform, Clearwater serves hundreds of insurers and asset managers as two of its key client market segments. With this report, the company provides client and others including insight into investment trends.

"The search for yield amid low interest rates has driven insurers into non-traditional asset classes and away from traditional safe havens," said Sandeep Sahai, Chief Executive Officer, Clearwater Analytics. "This creates significant challenges because non-traditional asset class data is often extremely complex and deciphering it requires multiple systems and manual processes, which brings serious risk for misinterpretation or misguided action. This report demonstrates the urgency of working with trusted partners to ensure accurate and timely accounting."

The survey polled insurance investment and accounting professionals as well as C-Suite executives across hundreds of insurers on a global basis. Regardless of the size or regions, the data illustrates the way insurers invest and that their related investment technology platform is changing significantly. Following are the key takeaways and data revelations.

Insurers Focus on Non-Traditional Assets

Clearwater's Insurance Investment Survey results clearly show that non-traditional asset classes have a foothold and will garner additional investment in the years to come.

• Top 4 non-traditional asset classes – The search for yield has driven insurers into new assets that have already made sizeable footholds with insurers. Fifty-five percent or more of insurers indicate some level of allocation to Private Placements, Private funds (LPs), Mortgage Loans, and ETFs. More than 1/3 of respondents said they will increase exposures with non-traditional assets.
• Other emerging asset classes – There is a growing use of bank loans and other complex asset classes. Insurers also reported increased investment in derivatives.
• Investment allocation challenges – Despite the momentum around non-traditional assets, some insurers are holding back due to factors such as investment guidelines, regulatory constraints or concerns, and lack of expertise.

Reliance on External Managers' Expertise is Here to Stay

External asset managers are a core and growing resource for insurers. Insurers who use them to manage at least half of their portfolio expect to increase or maintain their dependence on external managers.

• External asset manager usage – The vast majority of respondents use external managers, ranging from 20% to 80% or more of their total portfolio.
• Insurers' requirements for asset managers – External managers are being measured by a variety of factors, but performance (62%) and insurance client expertise (46%) were most commonly cited among the survey respondents.

Insurers are Ramping Up Their Tech Stack and Risk Analysis, But Room for Improvement Remains

Non-traditional asset classes often create technology challenges for insurers, as indicated by the survey data showing that more than half of the respondents reported juggling multiple technologies to deliver on investment accounting. Additionally, risk and related analysis were cited as requirements including benchmark comparison, exposure analysis, scenario testing, VaR, and ex-post risk. The need for technology is very clear because half of surveyed insurers state that manual processes are the leading factor slowing down their monthly close process.

"Insurers who deploy an advanced cloud-based singular platform, designed to deliver on any asset class, no matter the complexity, will benefit from actionable intelligence and as a result their investments will outpace those failing without trusted visibility," added Sahai.

The full 2021 Clearwater Insurance Investment Survey Report is accessible here. Additionally, Clearwater Analytics held a webinar to discuss the findings with its subject matter experts including Steve Doire, Strategic Platform and Client Advisor; Chandresh Iyer, Head of New Markets; and Cynthia Pennell, Enterprise Sales Leader. The recording can be accessed here. 

Survey Methodology

Over the course of two months in 2021, Clearwater Analytics surveyed insurers across the globe as part of the 2021 Insurance Investment Survey Report. This includes respondents from the Americas, EMEA, APAC, and offshore. In total, more than 1,000 insurance professionals participated, comprising all types and sizes of insurers. Half of respondents identified as working in investment accounting, and the other half were split between operations and investment management. Respondents are anonymous.

About Clearwater Analytics

Clearwater Analytics is a global industry-leading SaaS solution for automated investment data aggregation, reconciliation, accounting, compliance, risk, performance, and reporting. Each day, the Clearwater solution reports on more than $5.6 trillion in assets for clients that include leading insurers, asset managers, corporations, pension plans, governments, and nonprofit organizations – helping them make the most of their investment portfolio data with a world-class product and client-centric servicing. Investment professionals around the globe trust Clearwater to deliver timely, validated investment data and analytics. Additional information about Clearwater can be found at clearwateranalytics.com, LinkedIn, and Twitter.

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