Technologies to help manage and automate the reinsurance ceding are becoming increasingly critical for insurance carriers, according to Martin Greenberg, Reinsurance Product Manager for Sapiens, a global provider of software solutions for the insurance industry.
Greenberg noted that managing reinsurance is an often overlooked and underserved part of the insurance process, but offers numerous benefits for carriers if done effectively.
For instance, by employing new technologies, insurers can reduce costly errors, boost efficiency, reduce costs, and gain greater transparency and control of this vital function by eliminating complexity from the process.
“Doing reinsurance management manually today is not only dangerous, it’s irresponsible, especially when there are solutions available to help automate the process and to introduce much-needed measures of accuracy and efficiency,” said Greenberg.
“That said, in order to address the challenges inherent to the reinsurance management process in the most timely and affordable manner possible, insurers often decide to rely on solutions designed to integrate with existing systems to cede, manage, and record.”
Currently, available reinsurance management solutions offer a range of functionality that can be deployed on premises or hosted in the cloud.
On a basic level, most modern solutions are primarily proficient at capturing existing contracts (both treaty and facultative), accounting appropriately for associated ceded premiums, commissions, and claims, and providing business reporting.
They can also support regulatory compliance by generating key reports, while modular solutions make adding inputs, such as the ability to model results from capital models, catastrophe models, and exposure management systems, less difficult.
Some solutions help primary insurers monitor reinsurance creditworthiness, which helps the cedant maintain a view on the financial security of its reinsurers.
“Reinsurance almost always involves significant volumes of premium, ceded annually, to ensure acceptable ratings, protect surplus, and manage the enterprise risk profile,” Greenberg explained.
“However, if poorly managed, there is the potential of inaccurate premium and acquisition costs, and given the complexity of many reinsurance arrangements, insurers risk missing significant claims collections. If the process is not transparent, documented, and auditable, untold time and resources may be spent to solve problems that need never have occurred.”
Greenberg believes that manual processes such as spreadsheet sharing and reporting are still consuming valuable time within insurance organisations and causing errors that often result in the misallocation of premiums and claims.
“If this is not corrected promptly, it can easily lead to losses in the millions of dollars and the potential need to refile years of financial statements,” he warned.
Legacy technology siloes also ensure that uniform, accessible data is often lacking, preventing many insurers from conducting the performance analyses of individual contracts or individual reinsurers required in negotiations.
Additionally, inaccessibility of enterprise data related to reinsurance contracts can make it difficult for insurers to identify which coverages should be ceded to particular reinsurance covers to enhance financial performance and manage capital more efficiently.
“Given the expense and importance of reinsurance, Excel spreadsheets no longer suffice for managing said coverages and contracts,” Greenberg concluded.
“Managing and optimizing reinsurance coverage is a critical task. Executing it effectively in today’s fast-moving, increasingly complex world demands the use of reinsurance management software for ensuring accuracy.”