New research from Clearwater Analytics suggests more insurers are moving towards external fund managers, not primarily to save money or fill staffing gaps, but to get better reporting, clearer data, and more visibility across increasingly complex portfolios. The study covered insurance asset managers in Australia overseeing a combined $1.48 trillion in assets.
Every firm surveyed said it already outsources at least part of its portfolio. On average, 35% of funds are managed by third parties, with responses ranging from 25% to 45%.
That share is expected to grow. Nearly two in three respondents said they expect more assets to be managed outside their firm over the next five years. A quarter said they expect more assets to stay in-house, while about 13% said the balance would remain unchanged. In Hong Kong, the move appears stronger, with 88% expecting a bigger shift to external managers.
“The use of third-party asset managers in Australia will accelerate as insurers become increasingly comfortable with the practice and seek specialised expertise for complex private market investments,” Shane Akeroyd, chief strategy officer of Asia Pacific at CWAN said.
“This shift is not being driven by a desire to cut costs or due to a lack of internal talent, but the adoption of technology and the growing use of platforms which provide insurers with greater control and transparency within their portfolios.”
The expected rise in outsourcing comes alongside a broader change in investment mix. Private market allocations are projected to increase from 21% of holdings to 38% within five years. At the same time, 80% of firms said they plan to diversify more over the next three years, including 6% expecting a dramatic increase.
That shift is creating pressure on systems and operations. Data integration was ranked as the biggest challenge, followed closely by asset complexity. Only 34% of respondents said their current technology systems are very effective at handling new asset classes.
The survey also found that insurers are now working with more managers than before. Nearly 86% agreed this has led to data arriving in multiple formats, making it harder to access and use the information they need.
In Australia, the main reason given for using external managers was better reporting. Respondents also pointed to the stronger reputation of third-party managers and wider acceptance of the model. Better control over portfolios, stronger analytics, and improved visibility were also ranked highly. By contrast, cutting costs and covering a lack of in-house expertise ranked as the least important reasons for the shift.
“As insurers diversify their investment strategies and engage more external managers, the ability to bring together and analyse data across disparate asset classes and systems has become critical. With private markets set to represent more than a third of future allocations, firms can no longer afford the performance gaps we’re seeing in foundational capabilities,” Akeroyd said.
Firms are also adjusting internally. The most common responses include hiring from a broader range of sectors, expanding risk management roles, and increasing training to address capability gaps.
At the same time, the sector is preparing for more consolidation. The survey found that 96% of firms expect mergers and acquisitions activity to increase.
“These operations require integrated platforms that simplify complexity, strengthen risk oversight and scale seamlessly as portfolios grow and regulations evolve. With 96% of firms surveyed expecting increased M&A activity, the firms that close these capability gaps first will have a significant competitive advantage as the sector consolidates,” Akeroyd said.
