The specific problems encountered by P&C reinsurers may differ from the life and annuities sector, largely due to differences in business line complexities. But one thing held in common by both groups-getting up to speed-is an understatement, according to Richard Ruggiano, AIG's senior reinsurance officer and vice president, domestic brokerage group."We still process reinsurance the way we did 80 years ago," says Ruggiano, "and getting where we need to be is an uphill battle."

It was a mere five years ago when New York-based AIG, under Ruggiano's direction, embarked on a quest for improved data continuity, error reduction and overall communication between its internal reinsurance staff and external partners.

Ruggiano acknowledges that AIG represents something of a microcosm in the industry. At the corporate level, the company takes individual pieces of business, bundles them and cedes them off to reinsurers.

"We have a number of different companies using different systems, so we had look at each one of AIG's 23 systems and develop a common platform," he recalls.

Early on, the problem came down to consistency from department to department.

"A significant amount of time was spent deciding on just the nomenclature," Ruggiano says. "What the claims department referred to was not necessarily the same term used by the underwriting or actuarial departments."

Ruggiano realized the company needed standards, so it looked outside for common terms and definitions-and ended up with a 1,400-term glossary.

Using ACORD standards to help facilitate common nomenclature didn't address AIG's other problem, however: reducing the number of times staff input the same information into the system.

"Our goal was to capture information one time and move it on to someone else for input. This proactively addresses errors, which can be a tremendous problem when it comes to collections and recoverables," he says.

Finding a communication bridge to brokers and markets came next. "First we tried to develop one system everyone could use, and that was virtually impossible, so we created something that would receive information, manage edits and process it through. This meant we first had to understand everyone's process, so we changed a lot of our processes to create a system that would work. In some cases departmental users didn't agree, so we had a mandate."

Working with Salt Lake City-based software provider eReinsure, which uses XML standards to provide an online platform for managing the placing of reinsurance, AIG then built a system that would sit atop all the other systems.

Not surprising, the company's initial focus was on its larger treaty portfolios, but thanks to what he calls the "e-re" platform, the facultative side is also coming on board.

"We knew from our reinsurers' and reinsurance brokers' perspectives, we needed to look at the treaty side first and didn't want the facultative to draw down the larger piece we needed to get up and running."

Ruggiano says that use of standards to create its front end project, which has a target completion date of late 2007, can be compared to using a coin machine at the bank.

"It puts all coins in the bin and sorts through them, sliding them down into their respective slots. The same principle applies to property/casualty treaties, because with our new system, effective dates and other parameters become rules that are embedded for future use," he says.

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