The financial landscape for insurance companies is shifting, and with it, a growing opportunity for Outsourced Chief Investment Officers (OCIOs). As insurers seek higher returns in a low-interest-rate environment, particularly through alternative investments like private credit, firms like Morgan Stanley are positioning themselves to capitalize on the trend. This move reflects a broader industry expansion, with OCIO-managed assets projected to reach $4.2 trillion in the U.S. By 2028, and $7.3 trillion globally by 2029, according to Chestnut Advisory.
Morgan Stanley, currently the sixth-largest OCIO provider based on assets managed, is actively building out its team to cater to this increasing demand. Sona Menon, head of OCIO for Morgan Stanley’s wealth management business, confirmed the firm’s plans to hire talent specifically focused on the insurance sector later this year. Menon and her team currently oversee $247 billion in OCIO assets, with a relatively small portion – $5 billion – currently allocated to insurance clients. The largest segment of Morgan Stanley’s OCIO business remains private wealth, managing nearly $87 billion.
The surge in interest from insurance companies stems, in part, from the success of firms like Apollo Global Management. Following the 2008 financial crisis, Apollo co-founded Athene to acquire discounted blocks of annuity liabilities and reinvest in higher-yielding private credit, a strategy that proved highly profitable. This model spurred similar initiatives from KKR, Blackstone, and Brookfield, demonstrating the potential for alternative investments within the insurance industry. The appeal of OCIOs lies in their ability to navigate the complexities of these investments and provide specialized expertise.
The Allure of Outsourcing for Insurers
While asset managers have long worked with insurance companies, the OCIO model offers a more comprehensive, outsourced approach to investment management. This is particularly attractive as investment complexity rises, according to Mark Erickson, global insurance strategist in BlackRock’s Financial Institutions Group. “As investment complexity rises, insurers are fundamentally rethinking how they manage portfolios,” Erickson said.
Data from Clearwater indicates a significant increase in outsourced insurance assets under management (AUM), reaching approximately $4.5 trillion in 2024, up from $2.9 trillion in 2020. A 2025 report by BlackRock reveals that 87 percent of insurance companies are planning to change their asset management operating model, with 53 percent considering a hybrid approach – combining in-house and outsourced management.
However, entering the insurance market isn’t without its challenges for OCIOs. Insurers face stricter regulatory hurdles and capital requirements compared to traditional OCIO clients like pension funds and endowments. Joe Eppers, CIO for Selective Insurance, a firm known for its cautious investment approach, emphasized the unique needs of insurance companies. “It’s difficult for new entrants like OCIOs to gain traction in managing insurance company portfolios, primarily since of the capital, accounting, ALM, liquidity, and regulatory considerations and expertise required in managing insurance assets,” Eppers stated.
Competition Heats Up in the OCIO Space
Morgan Stanley isn’t alone in targeting the insurance market. AllianceBernstein, which already managed some insurance assets in 2024, made a concerted effort to expand its insurance business by hiring Geoff Cornell, former CIO of AIG, as its first-ever insurance investment chief. Cornell stated that growing insurance assets under management is a key part of his mandate. AllianceBernstein currently manages approximately $200 billion in insurance assets, with roughly half coming from its parent company, Equitable.
Menon’s appointment to lead Morgan Stanley’s $184 billion OCIO business, effective April 2025, signaled the firm’s commitment to growth in this area. She replaced Alper Daglioglu, who moved to Brookfield Asset Management in January 2025. Menon reports to Lisa Shalett, CIO for Morgan Stanley’s wealth management division and head of the global investment office, and Jeremy France, head of institutional consulting services. Prior to joining Morgan Stanley, Menon was a partner at Cambridge Associates, where she served as the firm’s OCIO and head of pensions for North America.
The broader trend of insurers turning to OCIOs isn’t limited to large-scale portfolio management. In 2022, Morgan Stanley assumed management of Hartford HealthCare’s $4.3 billion portfolio and Vanderbilt University Medical Center’s $1.1 billion portfolio, demonstrating a willingness to take on unconventional assignments and expand its client base.
Navigating the Complexities of Insurance Investing
Cornell of AllianceBernstein acknowledged the intricacies of insurance company investing, noting that it differs significantly from managing endowments and pensions. “There’s a lot of intricacies that go into insurance company investing … that don’t really exist in endowments and pensions,” he said. “It would take some time to build that capability.” This highlights the require for specialized expertise and a deep understanding of the regulatory landscape.
The increasing competition within the OCIO space suggests a dynamic market where firms are actively seeking to differentiate themselves and attract new clients. The focus on insurance assets represents a strategic move for OCIOs looking to tap into a growing segment of the investment industry. The demand for outsourced investment management is likely to continue as insurers grapple with evolving market conditions and the need to generate sustainable returns.
Looking ahead, the continued growth of the OCIO market will depend on factors such as regulatory changes, interest rate movements, and the overall economic climate. Morgan Stanley and AllianceBernstein, along with other key players, will be closely monitoring these developments as they refine their strategies and seek to expand their presence in the insurance sector. The next major update from Morgan Stanley regarding its insurance asset growth is expected in the third quarter of 2026, following the completion of its planned talent acquisition in the insurance space.
What are your thoughts on the growing trend of OCIOs targeting insurance assets? Share your insights and perspectives in the comments below.
