Reinsurers can expect huge losses from man-made and natural catastrophes, open-ended liabilities like asbestos and terrorism, and developing creative technology solutions to become increasingly important in future, Novarica notes in a new report.
The new challenges are in the wake of years of the reinsurance market being made competitive by soft market conditions followed by sharp hardening periods, notes a statement Tuesday from the U.S.-based research and advisory firm.
“As reinsurers try to adapt to changing market conditions, we’re seeing more firms looking into more advanced business intelligence and modelling solutions, and replacing core systems,” says Mitch Wein, vice president of research and consulting at Novarica and co-author of Business and Technology Trends report.
“In addition, many small and mid-sized reinsurers are using the soft market as an opportunity to leverage partnerships with hedge funds to grow their capital pool and gain access to business they wouldn’t have otherwise,” Wein explains.
“Reinsurance remains highly competitive, with technology playing an ever-larger role in insurers’ ability to attract, retain and profitably serve clients,” notes a report summary.
Some key findings in the report include the following:
- data analysis is viewed as central to the reinsurance business and pressure from competitors means moving from Excel-based analysis to more sophisticated technology;
- with carriers replacing core systems, reinsurers are focused on centralizing the business and dealing with an increase in audits and regulation, rather than a drive for modern technology; and
- many small and mid-sized reinsurers are using alternative capital as an opportunity, using partnerships with hedge funds as a way to grow their capital pool and gain access to business they would not have otherwise, and reinsurers are also looking for better product and geographic diversification to increase return on capital to remain competitive
Related: Using analytics among best ways to help reinsurers in challenging environment
The report provides an overview of reinsurers’ business and technology issues, data about the marketplace, and 19 examples of recent technology investments by reinsurers. The topics covered include recent market and financial trends; active insurer landscape; technology issues, priorities and examples by functional area; and the top technology priorities for 2017 and beyond.
Related: A.M. Best maintains global reinsurance sector outlook at negative