However, despite the decline in AUM, the use of external managers continued to grow as reported total client count across all managers grew by 7% to 5,800 from 5,400.
The report also found that public fixed income continues to be the dominant allocation in the insurance sector, accounting for 73% of total investments reported by managers as of the end of 2022, followed by 12% private fixed income; 10% public equities and 5% private alternatives.
While there continues to be more allocations toward private assets and alternatives by insurers, core fixed income remains predominant. "Many of the long-time insurance asset managers built their businesses directly in core fixed income," the report said. "Some have added other asset classes, while others have not ventured away from their bread and butter." Moreover, the top 40 outsourced investment managers in the survey reported the total AUM managed for insurers increased to $3 trillion in 2022 from $1.3 trillion in 2012.
In addition, the number of managers participating in the IIOR climbed to 67 in 2022 from 58 the prior year.
Most of the new participating managers, the report said, bring private asset class capabilities, a "trend we have seen in recent years as insurers expand their asset allocation."
While insurers' actual allocations to private assets remains modest, the year-over-year percentage increases in reported AUM of certain strategies was significant. For example, private equity/venture capital assets surged by 79%; structured private debt rose 46%; and corporate middle-market debt was up 24%
"Insurer investment programs have grown in sophistication since the great financial crisis, and the prolonged low-rate environment convinced many insurers to look beyond investment-grade bonds," said Sandeep Sahai, CEO at Clearwater Analytics, in a news release issued in conjunction with the report. "As investors diversify to increasingly complex asset types, they invested the time to understand these asset classes with the support of experts."
Steve Doire, strategic adviser at Clearwater, said in the news release: "When it comes to using third-party investment management solutions, insurers continue to lean on external managers as a critical resource. Many insurers have recognized the talent and services that the scale of external managers brings, and they are clearly taking advantage of their expertise."