New Business Complexity Drives Insurers to Re-Shape Their Operational Strategies

By Tim Reilly | 21 October 2015

The insurance landscape can look gloomy for operational teams – low interest rates, evolving regulatory and financial reporting requirements, and constant technological changes present ongoing challenges. But what if you viewed these factors as opportunities? How are your peers contending with these challenges and changing their operating strategies, risk profiles, and asset management techniques to their advantage?

SS&C works closely with many of the world’s leading insurance firms and we maintain an ongoing dialogue about how our clients are operating in this difficult market, the effectiveness of their current processes, and their plans for the future. In the second quarter of 2015, we conducted the 2015 Global Insurance Asset Management Technology Outlook, surveying 100 insurance investment, accounting, technology, finance, and operations executives. With 32% of responses received from insurance firms with AUM of $50B+, we got an inside look at what tools and techniques the largest insurance firms are using to stay ahead of the curve, and what they see as emerging trends.

Key findings include:

  • Insurers are shifting away from internally developed investment systems – We found this to be an overwhelming trend among our respondents. It’s worth noting that the size of the organisation is a significant factor in the rate at which insurers decide to make the shift, with smaller firms leading the charge and larger insurers moving more slowly. The companies we surveyed are primarily considering hosted solutions, co-sourcing, and SaaS offerings as viable alternatives to internally developed solutions.
  • Processing new security types is the most cited challenge for expanding firms – The quest for performance is driving insurance firms of all sizes and types to seek assets that produce higher returns, creating processing challenges if the right operations and controls aren’t in place. Nearly 60% of respondents are operationally challenged by processing new security types.
  • Cloud adoption growth and technology outsourcing on the rise – With 80% of respondents identifying their cloud strategy as a critical concern, the cloud is at the forefront of many firms’ operational considerations.
  • Maintaining skilled staff and regulatory compliance are top priorities when choosing a sustainable operational model – Survey participants are looking for staff with investment accounting, performance measurement, and tax accounting expertise to help support their business. Additionally, the need for knowledge on emerging regulation and compliance make the necessity for quality talent critical for adapting business models to the evolving insurance landscape.
  • Operational risk and market risk are top concerns – Thirty-five percent of respondents indicated operational risk as their chief concern, beating out both regulatory and cybersecurity risk. This sentiment demonstrates that the increasing complexity of internal operations has outpaced external risk factors.

Today’s investment operating environment requires agility. With the right people, process and technology, insurance firms can react nimbly to change. To learn more about our results and the factors that are driving insurers today, download our survey here.

By Tim Reilly, Senior Vice President for Institutional and Investment Management, SS&C

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