In recent years, the reinsurance industry has faced a variety of challenges, including fluctuating market conditions and major losses. To rebound, reinsurers need to invest in technology to improve analytics, harness their intellectual capital, improve productivity, streamline processes and become more efficient, according to a new report Novarica.
According to the research and advisory firm, which focuses on insurance technology and strategy, some reinsurers are investing in several technology areas that will help them combat the challenges they face, including tremendous losses from man-made and natural catastrophes and open-ended liabilities such as terrorism and years of a soft market followed by sudden and sharp hardening periods.
These technology investments include advanced analytics for better decision-making and product development, portal and exchange systems that externalize and centralize intellectual capital (to avoid all the firms’ knowledge being held in a few people’s heads), tools to manage claims, workflow applications, financial modeling, solutions that streamline quarterly close/reconciliation and regulatory reporting, and more. The findings are part of Novarica’s newly released report, “Business and Technology Trends: Reinsurance.”
“Novarica research has shown that technology solutions in place at most reinsurance companies often lags behind other areas of the insurance industry,” Jeff Goldberg, vp of research and consulting, Novarica, said in a prepared statement. “Reinsurers typically have a lower degree of automation than other insurance sectors, as well as a much simpler technology architecture. Going forward most reinsurers see data analysis as core to their business and are investing in business intelligence, data analytics and the use of sophisticated specialized components such as modeling tools. Once some reinsurers begin investing in data analysis and predictive modeling, other reinsurers must follow; otherwise, they will face adverse risk selection and lose market position,” said Goldberg.
Unfortunately, today, technology solutions that many reinsurers use now often lag behind other areas of the insurance industry. According to Novarica, millions of dollars of business are often still managed via Excel, often on individual laptops.
The reinsurance study found that top technology initiatives for reinsurers include business intelligence and modeling tools (and a movement away from Excel) as well as core system replacement in order to centralize business operations and manage an increase in audits and regulations.
[IMG CAP 1]
According to Novarica, reinsurers’ capital is more than adequate. But there are pressures to long-term profitability, such as continuing low interest rates and alternative capital that’s entering the market. As such, reinsurers are pursuing strategies to boost both growth and profitability, including diversifying into new geographies or into primary insurance, mergers and acquisitions, offering their own alternative capital solutions, and shifting focus to high-growth niche business.
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access