January 14, 2015 by Canadian Underwriter
Advanced analytics for better decision-making and product development has been identified as a top business and technology trend for the reinsurance industry, notes a new report from research and advisory firm Novarica.
The reinsurance industry is facing challenging conditions and, as such, reinsurers need to adapt and come up with creative solutions, notes a statement from Novarica, which earlier this week released the report, Business and Technology Trends: Reinsurance.
The report – part of a series on key business and technology trends in specific line of business segments in the U.S. insurance industry – provides an overview of reinsurance business and technology issues, data about the marketplace and 10 examples of recent technology investments.
Looking to support such solutions, the report notes some reinsurers are investing in technology areas, including the following:
“Reinsurers typically have a lower degree of automation than other insurance sectors, as well as a much simpler technology architecture,” Jeff Goldberg, vice president of research and consulting at Novarica, notes in the statement from the company, which provides information, insights and perspectives on markets, operations and technology to financial services and insurance executives.
Overall, “the technology solutions in place at reinsurance companies often lag behind other areas of the insurance industry, and millions of dollars of business are often still managed via Excel, often on individual laptops,” notes the report’s executive summary. “The pressure is not for modern systems, however, but for stable and robust systems that can support the current business,” it adds.
“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 modelling tools,” Goldberg reports.
Without investing in data analysis and predictive modelling, though, he predicts that reinsurers “will face adverse risk selection and lose market position.”
The report notes that alternative capital entering the marketplace is squeezing an already soft market. “Many small and mid-sized reinsurers are using this as an opportunity, using partnerships with hedge funds as a way to grow their capital pool and gain access to business they wouldn’t have otherwise.”