During a recent interview with Reinsurance News, Jereme Ramsay, Director, Business Development & Client Relations, Bermuda, SS&C Technologies, explained that if re/insurers are looking to increase allocation to private markets, then they need to make sure they have a “combination of the right technology as well as operational and accounting expertise”.
According to Ramsay, this is highly important in order to accommodate the “nuances associated with processing accounting for those investments.”
He said: “Re/insurers can staff and hire themselves or they can look to an outsourcing partner that has invested in technology and built a bench of broad and deep expertise in private market and private investment administration.
“If they do not find the right combination of technology and people, higher yields will quickly erode through increased operating costs potentially increasing risk.”
During the discussion, Ramsay also highlighted how AI in advanced automation technologies are being applied across the reinsurance sector, and how this ultimately is helping the industry to achieve both greater scale and operational efficiency.
“In light of increased investment portfolio breadth and complexity, there are opportunities to bring scale and efficiency to your operations. Recent advancements in technology, particularly artificial intelligence (AI), can help address these challenges, dramatically improve operational processes and deliver significant ROI,” he said.
Ramsay highlighted the four variants of AI that are being implemented across the industry; machine learning, intelligent process automation, predictive analytics, and natural language processing.
He explained that each of these variants are being used to solve for specific operational bottlenecks, repetitive tasks and outdated processes, which ultimately can allow for team members to be redirected to their most valuable functions.
Moreover, Ramsay also addressed what he believes are some of the biggest risk implications and considerations for re/insurers, as they look ahead to the markets and regulatory jurisdictions they plan to operate within in the near future.
He said: “As allocations increase to the private sector, regulators will scrutinize these markets to understand the risk and exposure across insurers’ investments fully. They will ask questions regarding investment transparency on deals and specific areas about the underlying risks and their exposure to a catastrophic event, including the cash flow models insurers use to make predictions.”
Adding that “There is a shift in asset allocation into private market investments, and the regulations are designed to ensure that member firms have adequate capital and solvency to meet their expected liabilities.
“To that end, suppose 50% of the investment book goes into the private market. If insurers have limited “look-through” transparency into the underlying individual deals or transaction details of such investment vehicles, without the proper bond covenants, it may become increasingly more difficult to understand the true capital risk, cash flow and liquidity available for meeting expected liabilities.”
“Simply getting process-ready data into the core system is a big challenge. Investors need a systematic way to collect high volumes of documents from creditors, fund managers and other sources and to track information that has been received as well as outstanding. Operations teams can leverage intelligent technologies such as optical character recognition (OCR) and natural language processing (NLP) to extract, parse and process data from statements and notices, improving data accuracy and reducing the time, labor, and risks of human error associated with manual input. This will help the accounting process while ensuring timely, accurate and reliable information on which to base its investment decisions,” concluded Ramsay.
To learn more about how SS&C can be your key to re/insurance investment excellence visit its website.