The Pandemic’s Operational Impact On Reinsurance Underwriting

In this blog (the third in a series of four – part 1 & part 2), I will consider the value of underwriting workbenches and super performant exposure management tools for reinsurers following the wholesale migration of the reinsurance market to remote working 15 months or so ago.

As we know, in the direct markets, the move to remote working gave a boost to the adoption of third-party placing platforms and the use of zoom/teams, etc. The reinsurance industry had already started adopting a number of electronic trading via in-house broker platforms, and given its global nature reinsurers, brokers and clients were already very used to interacting via teleconference and teams. However, the loss of face-to-face interaction, cancelled conferences and client visits has had an impact, particularly for those seeking to grow their businesses and expand relationships in this traditional market.

The most significant impacts will have been in the internal operations of reinsurers. Whilst many reinsurers were already adroit at handling multiple time zones and offering a “follow the sun” service through their global platforms, the change to remote working, with individuals/teams unable to work physically alongside each of other in the “next bank of desks”, put reinsurers’ operations under strain. We got great insight into this from the Science of Risk survey we conducted at the end of last year.

In a remote working context, it is not always easy to track and see where work is, how it is progressing and when it is expected to be completed. When multiple high value deals are in flight, ad hoc emails, calls/IMs used to check on progress are highly inefficient and get in the way of the work itself. The opportunity for things to go wrong when handing-off between teams/individuals delivering the underwriting tasks existed before the pandemic, but remote working increased the risk a notch or two further, even with good email discipline and single file configuration management. Following the old adage, if it can go wrong, it will go wrong – particularly it seems when time is of the essence.

The increased use of and adoption of technology during the pandemic has greatly accelerated and utilising it with an underwriting workbench to discretely but pro-actively track and monitor completion of workflows, to spot where there are holdups or see when teams are overloaded is invaluable. It particularly makes sense in the remote working context so that processes are visible, predictable, tight, and moving as efficiently as possible. It is all about being ahead of the issues, identifying the risks and intervening. Pre-empting mispricing, poor risk selection, and leaving a clear audit trail ensures the underwriting process is slick and rigorous. The time and effort saved managing process can be better deployed working with clients and brokers to create market winning solutions. Few in the market see organisations returning to a 9-5 / 5 day week in the office, and as hybrid operational models are adopted the risks and inefficiencies associated with passive email and collaboration tool-based working will endure.

Equally, the move to remote working has made the handling of large data sets for many property treaty reinsurers more challenging. The timescales associated with crunching client data sets with tens of millions of locations were already an issue faced by many reinsurers. Non-performant in-house solutions or slow-running catastrophe model software often required underwriting analytical objectives to be compromised and/or a reliance on third-party modelling in order to meet trading turnaround timescales.

The compromises needing to be made are non-trivial and result in Underwriters having to assume a worst-case marginal impact scenario when writing a new or even renewing a piece of business, meaning potentially good business is being passed on, or going in “Blind” and possibly assuming poor business. It is perhaps for this reason we are now seeing a flurry of property treaty reinsurers interested in using our super-performant Exact Max exposure management solution with its ability to process many cedant portfolios with many tens of millions of locations within a treaty portfolio of billions of locations. Exact Max also pulls out key underwriting insights into cedant portfolios, delivering marginal impact in real time, while allowing aggregate portfolio management and optimisation at super scale.