Modernizing Insurance Investment Operating Models for the Decade Ahead

While the goal for insurance investors has not changed—namely, increasing alpha while mitigating risk—investment teams are dealing with intensified scrutiny and pressure on many fronts. Regulators, boards and even local communities all have evolving agendas and requirements that lead to increased reporting, accounting and operational burdens. Additionally, historically low yields have driven the search for alpha down less familiar paths. Specifically, private market and other forms of alternative investing and lending come with their own unique set of challenges and hard-to-find expertise.

These conditions are causing insurers to rethink long-standing processes. In this blog, we discuss some of the most prevalent operational challenges and how they can translate into more advanced blueprints for real progress.

Big Picture Thinking to Solve Silo-based Challenges

It’s not about updating the tech stack or adjusting to the regulatory environment or managing new asset classes. Operations teams are now being asked to do more in all of these areas and to do so more quickly.

For instance, operating teams need to assist the front office as they expand investments into new asset classes, onboard newly-acquired business entities and investment portfolios, integrate and reconcile new data sources against multiple internal and external counterparties, and manage audit inquiries and changing investor, board and regulator reporting requirements. There is a lot of pressure on operating models, especially for those who are in the early stages of modernizing.

Whether your firm is in the early stages of modernization or you are further along in the journey, here are some broad-based steps to help you chart a path forward:

• Map out your current operating model. This may be one of the most valuable exercises you can complete.
• Understand how your business strategy needs to evolve. Think about what ideal communication and collaboration across today’s silos look like in your future state as well as the advantages you expect to reap.
• Make decisions about what you want to be great at, knowing where you want to focus your internal resources will help you frame an efficient partner strategy.
• Minimize transition risk by engaging with a partner who can help you achieve your vision and make changes without disrupting your current business and customers.

What to expect from a partner: Three necessities

There are many firms that support insurance investment operations, and identifying the right partner comes with a level of due diligence. First, look for one who is already deeply invested in AI-driven technologies. Robotic Process Automation, Natural Language Processing and Machine Learning will have profound effects on every aspect of the insurance industry—including investment operations. As a use case, think about the document pile-ups that happen at the end of the quarter. AI-driven tech can process those quickly and accurately, saving time and resources.

Second, find a firm focused on the advances that need to take place in the areas of data management and quality control reviews. Taking every precaution to reduce audit burdens in an environment of heightened scrutiny and regulatory change should be an ongoing priority.

Third, ensure that your partner has well-established capabilities in holistic risk management. Insurers with complex diversified portfolios need to be able to look across their investments and know the risks: systemic risks, situational risks and theoretical risks.

SS&C combines deep insurance investment operations expertise as well as all three necessities noted above: AI-driven technology, data management and quality control reviews, holistic risk management, and more. We have helped hundreds of insurers transform and modernize their investment operations, insurance accounting and operations teams through successful process and technology transformations. To learn more, contact us.