Insurers haven’t focused much of their budgets on reinsurance systems in the past. Today, most insurers are using legacy technology or custom Excel spreadsheets to manage their reinsurance. However, novel market pressures are calling for insurers to reexamine reinsurance management solutions.
Product simplification can increase the complexity of reinsurance, requiring additional risk calculations. Overlapping transactional data from catastrophe contracts also increases the complexity of reinsurance data for financial reporting and management. Many insurers that are considering a modern system want to take advantage of increased business intelligence and data and analytics capabilities as well as operational efficiencies via automation.
There is no dominant vendor in the reinsurance management space. However, improvements to reinsurance offerings in the last five years have led to several modern reinsurance options. Some of these reinsurance solutions have a large production client base and demonstrate stability. Most modern solutions include browser-based front ends, a modern codebase, and cloud-based deployment.
Some key reinsurance management systems features include:
- Ceded and Assumed Business. Insurers use reinsurance management systems to handle ceded and assumed business. Ceded reinsurance is the policy risk that an insurer transfers (cedes) to a reinsurer. Assumed reinsurance is the policy risk that a reinsurer takes on from the ceding insurer. Most reinsurance systems support ceded management; assumed management is not as prevalent.
- Contract Management. Reinsurance systems store information about contracts: attachment points, aggregate limits, inurements, underwriting characteristics, participations, and commissions. Insurers and reinsurers negotiate reinsurance contracts individually; modern systems need to be flexible when customizing and maintaining contracts.
- Reinsurance Interfaces. There are multiple ways that humans and systems can interact with reinsurance management systems. All reinsurance management systems need an end-user interface where those responsible for reinsurance contracts can set up, maintain, and review contracts as well as enter data manually, when necessary.
Insurers will need reinsurance strategies in the future. It will soon become unfeasible to manage cessions via spreadsheets or inflexible legacy systems. Novarica anticipates that interest in reinsurance will continue to build over the next five years.
See Novarica’s latest Market Navigator, Reinsurance Management, for more on the reinsurance vendor landscape.
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