It's a given that placing business with reinsurers has never been a simple matter; its complexities are the bane of many an insurer.
Add the burden the underwriter faces in submitting a facultative risk, only to find that the application does not fit the terms of the targeted contract. So the notion of a reinsurer offering its insurer client a "self-service" option seems a distant idea. Until now, that is.
The reinsurance business is the risk-management backbone of the insurance industry, but has its own set of nuanced processes and lingo. These companies deal exclusively with carriers as customers, rather than directly with consumer or general business markets.
For underwriters and managers at client insurance companies, packaging up and sending business over to reinsurers has been a tedious and mainly manual process, requiring research and risk analysis. Recognizing that these programs impose a significant administrative burden on carriers, reinsurer Arch Re Facultative recently deployed a self-service intelligent portal environment designed to smooth the contractual process with its client companies.
In fact, many - if not most - of the contracts that occur between insurers and reinsurers have predictable circumstances, and can be accepted automatically and are appropriately called 'automatics,'" relates Philip Augur, chief operations officer at Arch Re Facultative. Facultative reinsurance is the reinsurance of individual risks by offer and acceptance, wherein the reinsurer retains the "faculty" to accept or reject each risk offered. This process involves a considerable amount of interaction and processing. Reinsurance programs are contracts between an insurer and reinsurer to bundle together facultative transactions that are similar in their terms and conditions in an attempt to fill the space between pure facultative transactions and treaties. Automatic business, on the other hand, "consists of an overarching contract that 'fits into the box,' if you will," Augur relates. "It's similar to a treaty, but smaller."
AUTOMATING THE AUTOMATIC
The challenge for Arch Re Facultative, a supplier of facultative reinsurance in the United States and Canada and a subsidiary of New York-based Arch Capital Group, was to be able to automate as much of this automatic business as possible, Augur explains. "That's the price these days to even be at the bargaining table with companies that are considering doing this," he explains. "We needed a Web-based facility for them to submit risks. Otherwise, it just creates a new administrative burden on them where they have to do a lot of extracts on their systems, or deal with IT issues."
By offering a Web-based service portal, underwriters at customer insurance firms "would be able to submit the risks as they come up on their desks," Augur says. "Then they're more likely to discuss the opportunity with us. Before, many client companies wouldn't even consider our proposal; we needed a more efficient mechanism for clients to report the risks subject to the contract."
Accordingly, the reinsurer wanted a user-friendly, Web-based portal to support its program contracts and provide a way for client underwriters to access these programs to submit risks. Last fall, the company implemented Mendix Business Server, running under the Mendix Portal, to support the initiative.
The portal, which is now live and accessible to 120 clients, supports reinsurance programs and provides client underwriters with online functionality to submit risk contracts and process the information in a structured and efficient manner. "We sign an automatic with a company that is interested in submitting the risks in this fashion," Augur says. "The underwriters will be using it, so the primary company underwriters are given a login and password. And as they come across risks in their day-to-day business that fits the box, they come on to our Web site and submit that risk. The portal then verifies that it fits the definitions of the box and applies the pre-agreed pricing."
Once a program has been deployed, client underwriters and their managers have access to an array of functions through Arch Re Fac's portal. The underwriter can submit a risk, and the application verifies whether that risk fits the terms of the contract. If that is the case, the price is instantly provided, and the client can bind. Risks that do not meet the terms of the contract can be submitted for special acceptance without losing any of the data already put in. As part of the process, special exceptions that don't meet the pre-established automatic criteria are forwarded on to Arch Re Facultative specialists for manual processing. "If it doesn't fit the parameters of the box, it tells the underwriter that," Augur explains. "But then it says, 'we will still handle that pure facultative,' and they don't have to re-enter anything. It just comes through to our staff as a special exception to the automatic agreement."
The portal application also will communicate Arch Re's structure and price for special acceptances to the underwriter, who can subsequently bind using an application function. In addition, the portal enables clients to endorse and cancel risks - be they under the terms of the contract or special acceptances. The portal also provides clients with a real-time overview of their bordereaux (reinsurance that shows loss history and premium history with respect to specific risks), as well as any pending tasks and activities.
The portal initiative also can be adjusted for the various technical capabilities of client insurance companies, and provides a valuable resource for them. "In the world of the primary insurance market, a lot of different companies have a lot of different levels of technical savvy," Augur points out. Whatever their technical limitation is, those are the people that have been wanting to use a system such as this. For some clients, its almost as if they can get more information from our portal about their book than they can get from their own system."
Joe McKendrick is an author and consultant specializing in information technology, based in Doylestown, Pa., and a regular blogger for www.insurancenetworking.com.
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