FRANKFURT (Bloomberg) — Insurance companies are about to shower at least $1 billion of fees on fund managers, and just a handful of firms are lining up to compete for the windfall.Deutsche Bank AG, BlackRock Inc. and Conning & Co. oversee about 40 percent of the $805 billion that insurers now farm out to asset managers. Insurers probably will more than double that amount by 2011 to lower costs and improve returns, according to a survey by Patpatia & Associates Inc., an industry consulting firm in Berkeley, California.

While the fees insurance companies pay are puny compared with the two percent of assets that managers collect for hedge funds, the business can be lucrative and more stable. Kevin Parker, who runs Deutsche Bank's asset management unit, has said two or three companies will eventually manage more than $1 trillion each for insurers. The industry currently has assets of about $16 trillion, more than 10 times what hedge funds oversee.

"There is a huge asset pool within the insurance companies and that's a tremendous opportunity," said Tom Brown, the London-based head of KPMG LLP's investment management business in Europe. KPMG is the third-biggest accounting firm in the U.K. "Hedge funds are smaller in absolute size and have capacity constraints, whereas the big insurance pools are at the other end of the spectrum in terms of scale."

Deutsche Bank, Germany's biggest bank and Europe's largest securities firm by revenue, is counting on insurers to help boost earnings at the asset management subsidiary, its least profitable. The company wants to expand what chief executive officer Josef Ackermann calls the "stable" businesses of consumer banking and money management.

The fund-management unit had $3.9 billion of revenue last year, including 57 million euros from insurers. Analysts estimate that Deutsche Bank's fees from insurers will more than double in the next five years as assets increase.

"The insurance market is a growth opportunity," said Matthew Clark, a London-based analyst at Keefe, Bruyette & Woods Inc., who has a "market perform" rating on Deutsche Bank shares. "The potential volume of assets coming into the market is the attraction, countering the lower fees."

Deutsche Bank lost Erik Kirsch, the head of its insurance asset-management unit, in May when the 27-year company veteran was hired by Goldman Sachs Group Inc., the world's biggest securities firm by market value. Frankfurt-based Deutsche Bank, which manages $150 billion for insurers, recruited 44-year-old Randy Brown from BlackRock the same month to co-head the insurance funds unit with Robert Goodman.

Goldman is investing "a disproportionate amount of resources" this year to build up the insurance business, said Suzanne Donohoe, 36, who runs the North American client unit at Goldman Sachs Asset Management.