Renewal rates are on the rise and set for significant acceleration shortly, especially around catastrophic renewal contracts, according to Reinsurance News. Reinsurance rate increases are no surprise given that the industry has encountered several high-impact hurricanes and tropical storms in recent years. The full impact of COVID-19 is still uncertain, but hurricane season will begin June 1.
What technology solutions can insurance and reinsurance companies—both cedants and retrocedants—evaluate to help them navigate the turbulent waters of rate increases in the coming months and the long-term? Here are some options to consider.
Leverage data and analytics
When it comes to claims leakage, most insurers do not have a good handle on which claims are not getting reimbursed by reinsurers, which leaves money on the table even after reinsurers receive premiums. Overlapping reinsurance contracts, especially those involving catastrophe contracts, create a complex web of what premium has been collected and paid and what claims have been paid and collected (or not).
A well-designed data architecture that incorporates reinsurance data models supported by BI and analytic tools can help insurers identify reinsurance issues and “what-if” impacts. This information is critical to identify in light of the coming rate increases.
Implement an underwriting workstation solution
P/C underwriting workbenches can be a useful tool to enforce reinsurance rules at the point of submission or renewal. They are especially helpful now, given the explosion of third-party data services and InsureTechs and the greater ease of building APIs and web services over the past few years, as detailed in Novarica’s P/C Underwriting Workbench report.
Access to exposures and impacts to the existing book of business, reinsurance contract data (supported by a reinsurance system), and mandatory facultative business rules can help insurers manage the effects of rising reinsurance rates.
Upgrade to a real reinsurance system
Many insurers have small groups of experts who handle reinsurance via manual processes in Excel spreadsheets or Access databases. Reinsurers and their auditors see this risk in the category of “single point of failure” and as a limitation to their ability to identify real risks—risks that could help them make recommendations to mitigate potential impact to an insurer’s bottom line.
The coming months of significant rate increases will inflate the need for insurers to understand these risks. Leveraging a vended reinsurance system can help ensure adherence to facultative, treaty, and catastrophic reinsurance contracts via system processes, automation, and security. These solutions, as profiled in Novarica’s annual Reinsurance Market Navigator, also allow data architects to incorporate reinsurance data into real-time and forecasting BI solutions.
Insurers and reinsurers are about to encounter some bumps in the road; considerations of technology solutions could help insurers navigate uncertainty.
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