Northern Trust Survey: Less Than 30% of Insurers Confident Their Investment Operations Infrastructure Will Meet Future Challenges

Less than 30 percent of respondents to an independent survey* conducted on behalf of Northern Trust (Nasdaq: NTRS) on the state of the global insurance industry said they were not concerned about the ability of their current systems to meet their future regulatory requirements.

The survey, conducted across the United States and Europe among more than 250 senior investment managers at global insurance companies, each with more than US$1 billion in assets, highlighted the investment operational infrastructure challenges insurance companies will face, particularly in an era of regulatory change and financial pressures.

“Insurers will imminently face a number of complexities due to regulatory pressures, ageing systems and a retiring workforce,” said Andrew Melville, head of insurance product and strategy, Europe, Middle East and Africa. “Whilst more than two thirds of insurers surveyed asserted their current investment systems perform well or extremely well, their abilities to be prepared for the investment infrastructure challenges ahead, will be significantly tested.”

Insurers in the United States will be required to comply with the Dodd-Frank Act while European insurers will be required to comply with the Solvency II directive. These regulations will increase demands for products to help manage compliance requirements, monitor risk management and report on investment performance.

Of the survey respondents, 50 percent cited their current systems as “customized with obsolete code” and the vast majority of respondents expect that up to a quarter of their staff will retire within the next five years.

“Insurance companies will require data in the right format and right degree of detail in order for their systems and processes to work,” added Melville. “As many of their legacy systems have been modified by multiple programmers over the years with little documentation, maintaining these existing systems will similarly be a challenge as programmers retire or leave the company.”

As a potential solution to the imminent challenges, close to a third of respondents believed insurers should move away from customized and hard-to-manage software vendors and systems in favor of standard industry platforms, provided by the outsourcing industry.

“The operational landscape of the future will require sophisticated infrastructure systems to manage and make sense of investment data – an administrative burden that is sure to stretch insurance companies’ resources,” said David Sullivan, insurance practice head for Northern Trust in the Americas. “By outsourcing to firms such as Northern Trust insurers don’t have to force their systems to keep up. They can leverage the expertise and scale offered by a provider who will innovate to address changing regulations.”

For more information, read the white paper and watch our video highlighting the findings here

* The survey was conducted across the United States and Europe among more than 250 senior investment managers within global insurance companies. Data finalised in December 2013.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 18 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of December 31, 2013, Northern Trust had assets under custody of US$5.6 trillion, and assets under investment management of US$884.5 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com or follow us on Twitter @NorthernTrust.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at http://www.northerntrust.com/disclosures