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Riding the wave of change in global risk and data

In many areas of life and business, our actions, likes, dislikes and behaviors are captured digitally and fed into the vast pool of data that drives algorithms. Data from sensors and machines monitor the natural world and the human-built environment. All this data in turn drives the advertisements we see online, the way organizations structure their investment plans and governments their policies and reaction to events. We have predictive power unlike ever before. Artificial intelligence, supercomputing, climate models enable us to understand risk if, of course, we can make sense of this ocean of information and act based on the insights it can, potentially, provide.

Reinsurance is facing an increasingly rapidly changing world of risk; war in eastern Europe, rising inflationary pressures, the availability of retrocessional cover, and climate change that affects exposure to natural catastrophes. While these events have sensitized people to risks prompting them to buy or add protection, they have also contributed to greater inequality driving further political and economic insecurity. In short, the world is changing fast on all fronts, and it is expected to continue to do so.

Individuals have an increasingly complex digital footprint but the amount of raw data available to assess the impact of global issues such as political volatility or climate change are enormous and often open to a wide range of interpretations. They are also subject to a myriad of interdependencies and influences.

Insurers and their customers are not going to be able to avoid all exposure to risk and continue operating. They are going to need to rely on reinsurers to help them understand the risks they can price and the impact of those they are going to need to accept or mitigate. For technology providers working in the reinsurance sector the challenge is to understand how we can help customers embrace the volume and velocity of data available in the 2020s and turn it into efficient processes and innovative new products and services.

Helping customers embrace the volume and velocity of data available in the 2020s and turn it into efficient processes and innovative new products and services.

Riding the wave of change with technology

Advances in technology have the potential to fundamentally change how insurers underwrite risk. Using artificial intelligence, machine learning, natural language processing, data enrichment and other technologies, frictionless underwriting allows for real and near-time quote generation from the insurer to the agent or broker without manual intervention.

Innovation can be driven by the intelligent use of data science, data management tools and an understanding of business value. With an insight-driven approach to customer and user experience management new and emerging risk attributes that require innovative reinsurance program design (such as parametric triggers and portfolio transfers) can be developed quickly to meet changing market demands. Technology can also meet the challenges of increased regulatory reporting requirements like IFRS17 and the need for efficient credit control, collateral management and budget to actual tracking.

Which technology path to follow?

Reinsurers are well aware of the challenges and opportunities of advanced data, digitization and applications technology. There is less confidence about which technology path they should follow and understandable nervousness about committing to large investments in a rapidly changing technological and macroeconomic environment. However, we are seeing some trends emerging.

Reinsurers are developing bespoke data processing applications and automating data ingestion and reporting. They are also creating secure and compliant data lakes, DWH capabilities and universal data translators, strategically integrated architecture, and seamless data flows. To meet regulatory and reporting challenges they are building enhance data processing and automated reporting platforms.

To drive efficiency, competitive edge and capital optimization, reinsurers are building advanced cash flow and actuarial modelling tools, web-enabled processes and the integration of reinsurance with underwriting systems including advanced treaty management. This enables users to create, amend and renew treaties faster and with a digital audit trail and financial reconciliation through auto-matching and workflow. Digitization eases engagement with insurers, retrocessionaire and custodians and the use of public cloud technology enables scale and speed.

Of course, there are always constraints. Reinsurance customers are frustrated by uncertain regulatory regimes, difficulties in accessing reliable and trusted data and a lack of available reinsurance literate technology subject matter expertise. There is also a reluctance to fully adopt integrated reinsurance process value chains.

However, the pace of change in the amount and complexity of risk and the data available to identify and price it has not slackened – neither will the need to embrace new technology.

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About Vinay Nagwekar
Director – Insurance
Experienced senior professional with 24 years of insurance experience in multiple geographies. Vinay has been working with insurance and reinsurance companies to shape value propositions and digital transformation initiatives to drive business benefit realisation. In addition to managing insurance portfolio, Vinay has led creation of consulting led solution propositions to align with customers’ IT and business strategy. He has worked with over 100+ insurance companies in 13 countries across Asia, Europe and the US in various roles across the years.

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