As well as an opportunity to support life insurers’ increasing capital needs, life reinsurance market players can also assist with the technological transformation of the industry, according to analysts at Berenberg.
The growing risk of disruption from regulatory changes and digitalisation, combined with technological advances sweeping through many parts of the financial services sector, is expected to drive significant change in the global insurance industry over the next decade.
In light of the technology trend engrossing the sector, analysts at Berenberg recently highlighted the potential opportunity for reinsurance companies to take advantage of insurers increasing capital needs and also their ability to assist with the technological transformation of the life re/insurance industry.
Berenberg notes several ways reinsurers can offer financially motivated transactions to primary players to assist with their capital needs and enable the transformation of the sector, broadly defined as cash financing or capital relief, but also draws on the perhaps lesser known and less understood technological support the reinsurance market can provide.
“In addition to supporting primary insurers with capital, we believe that reinsurance companies may be able help with the technological transformation of the industry in certain areas,” says Berenberg, in a recent report examining the life reinsurance industry.
Specifically, the report cites three areas where the reinsurance industry can help, being underwriting, processing and administration, and distribution/client interface.
“Life reinsurers can leverage the extensive mortality/morbidity data and underwriting expertise they have available to create “big data” tools for underwriting life insurance policies,” says Berenberg. The report continues to explain that the life insurance underwriting process is “arduous” in some regions, and can typically take many weeks to arrange which could be detrimental to insurance take-up.
Suggesting that reinsurers can utilise big data to develop a more efficient underwriting process to improve the experience for customers which in turn could increase life insurance penetration in some parts of the world, ultimately increasing demand for reinsurance protection.
“Reinsurers offer a number of administrative processing solutions that can significantly improve the efficiency of the life underwriting process,” explains Berenberg.
Regarding distribution/client interface, Berenberg explains that some companies have looked to improve the efficiency of this part of the life insurance value chain with the development of apps and also by acquiring stakes in primary insurers that leverage disruptive technologies.
“We are somewhat unconvinced about these efforts since reinsurance is a B2B business, meaning the companies have limited experience of building solutions for consumers,” adds Berenberg.
Overall, Berenberg analysts feel that reinsurance companies are most likely to take control of a greater part of the value chain via underwriting, driven by their access to vast sets of mortality/longevity data.
“In addition to embedding themselves into the value chain of the primary companies, we believe that the reinsurance industry could benefit from digitalisation by supporting new market entrants,” says Berenberg.