The 2023 reinsurance renewal season can only be described as having been challenging.
A convergence of macroeconomic and geopolitical factors and natural catastrophe events caused premiums to rocket, leading to aftershocks throughout the market and mounting pressure on carriers to review their portfolios.
In many ways, the challenges of 2022 were unprecedented. None of us could have predicted with any certainty the outbreak of war in Ukraine in February, or the continued impact of COVID-19 on global supply chains and the effects of inflation. Neither could we have expected the huge losses of Hurricane Ian, a sign of things to come as the climate continues to change.
Though early predictions of a drive for widespread coverage restrictions didn’t come to pass, rate increases across the board were significant. The global property market saw some of the toughest conditions following the devastation caused by Ian and a host of other Nat Cat events in 2022. Howden reported a 37% increase in rates, the biggest year on year increase since 1992.
Renewals roll around like clockwork once a year, but the complexity of this latest round seems to have caught many off guard. Was it solely because of these external factors? Or are the processes and tools that reinsurers have always used to assess the profitability of their portfolios and calculate rates, simply not advancing quickly enough to cope with what is an increasingly volatile world?
Managing the data dilemma
The key to managing reinsurance lies in being able to accurately assess individual and portfolio risks, and model for future change. Underwriters have the skill to do this well, they also have access to vast quantities of data that can give them forensic insight on the risks they’re writing – surely this is a winning combination?
In fact, the opposite is true. Today’s commercial and specialty underwriters are faced with a novel problem. They have thousands, even millions of data points available to help them to better understand their risks, from both external and internal sources. However, they are working with systems that weren’t built to handle these huge volumes of data. They’re pulling structured and unstructured data from multiple sources, manually transferring this data between systems, dealing with data lag on old sums insured, and managing red tape and manual administration processes.
With all of this going on, the potential for errors is high. Time is wasted and it’s easy to lose track of how the risk has progressed and evolved over the prior years (often ‘corporate amnesia’ sets in with underwriting teams unable to recall the verbal decisions they made the previous year). Underwriters can lose sight of the real insights the data could provide as they struggle to obtain a single view across all the information they possess.
Taking back ownership
As underwriters approach renewals, they are often reliant on reports generated by other teams within the business. This can take time, and again, information can be lost between the silos of different business areas.
As the role of the underwriter, and the technology available to them evolves, they now have more potential oversight than ever. Many of the modern technology platforms bring everything an underwriter needs to their fingertips, providing a single-platform solution for manging risk from submission to bind, and beyond.
But proactivity is just as important as technology. There is a school of thought that says renewals just turn-up each year and the business needs to respond. Preparations for renewal are starting earlier and earlier as brokers shop around for the best rates and coverage to meet the needs of their commercial clients.
There’s a period before renewals hit, where businesses will be running reports and reviewing their books, assessing how these books have performed and how individual clients have performed. They’ll form a strategy in terms of what’s going to happen next year asking themselves where they should put their business and reviewing whether to open up or close some lines.
All of this activity is admin-heavy, requiring underwriters to look in multiple places to get all the information they need to form a cohesive picture of what their business looks like, and assess how it should look in the year ahead. It is time-consuming and resource-heavy at a critical time.
Is technology the key to smoother renewals?
Reinsurers are starting to see the benefits of technology to smooth the renewal process, but tend to be slow adopters, hindered by well-established legacy systems and processes. In recent years we’ve seen more underwriters enquiring about platforms such as an underwriting workbench which supports new business, renewals and endorsements.
These AI-enriched platforms, which typically ingest and harmonise vast amounts of data both structured and unstructured, provide a single customer view. Tasks and workflow are driven by intelligent assist features created to optimise, automate and enhance the process, removing the admin burden on underwriters and allowing them to access everything they need in one place. For renewals, they leverage all the data already known about the risk from the preceding year. You can easily look back on the history and see the previous version of the risk, and then get to work on pre-loaded tasks relating to the upcoming renewal.
Reinsurance carriers can use underwriting workbenches to accelerate their decision-making processes and work with real-time data, allowing them to adapt and respond to changing market conditions and review their portfolios in line with evolving broker and client discussions.
We may have only just passed the 1/1 renewals for this year, but as the last few years have shown, there is no foolproof way of predicting what events and factors may lay ahead. This new uncertainty means that staying on top of emerging trends is more critical than ever. Advanced underwriting technology can do just that, and help underwriters keep track of their books in real-time. For reinsurers who have had their ‘art’ put to the test in the recent renewal round, just think how different 2024 renewals can be with advanced science supporting you.
Author: Martin Lancaster, Head of Business Architecture, Send. You can connect with Martin on LinkedIn here.