Bermuda roundtable: The evolution of exposure management on the island

Thomas Anderson, Director of Sales, US, AdvantageGo, recently moderated a virtual roundtable with participants from the Bermuda insurance industry. The overall themes were to discuss the evolution of exposure management, how reinsurers on the island are managing their exposures in the current climate, and how that has changed specifically in light of Covid-19. The event was held in partnership with tier one insurance publication, Intelligent Insurer.

In this lively debate, which I listened to as a silent participant, attendees discussed how tightening contract wording has become much more of a focus as a result of the pandemic, the way their organizations have pivoted to address unanticipated loss, and how investment in technology has paid off in Bermuda.

During the discussion, three main themes emerged:

1. Modularity vs. monolithic

When it comes to legacy software and the transition to newer technologies such as AWS or Azure, participants agreed that cloud technology had had a transformative impact on the industry and how they approach resources. One participant stated that where his organization has modular systems, they found that they were better equipped to transition to more innovative technologies and to address risk more swiftly compared to those areas with monolithic systems installed; commenting on this he said:

Although adapting to modular systems was preferred by all participants, one speaker said that it’s vital for his organization to have an integrated system that functions as one organism and can act as a backbone. However, when evaluating modular-based technology, participants agreed that it must have some kind of generic applicability and breadth of scope.

The fact is, many carriers are still running on monolithic and inflexible core systems that inhibit Insurers from rapidly responding to shifting market forces, capitalizing on new business opportunities, and releasing new products. However, massive “rip and replace” projects of large transactional operation systems are no longer necessary. Innovation and progress don’t need to come from radical and disruptive transitions. Systems can be updated in small chunks that don’t interrupt the whole IT organism. Incremental steps that augment and enhance processes are just as effective as a total overhaul and allow for more flexibility and agility for an organization to pivot when necessary.

2. Resilience

As the conversation turned to resilience, participants shared how they personally responded to the overnight changes to remote working and how their company responded in like. Everyone had their own story, but all agreed that they were pleasantly surprised at how resilient everyone has been and continues to be in the last year.

One participant revealed that at the beginning of lockdown, many colleagues predicted that remote working would be a major obstacle to progressing on strategic plans. But, as home working persists, the group concurred that the pandemic, along with embracing technology, have been fundamental in addressing potential new exposures such as silent cyber and moving the business forward in a positive way.

One participant said:

While many Insurers accelerated their digital transformation projects this year in response to Covid-19, the pandemic’s impact has revealed deep digital vulnerabilities. As a technology provider, we see two key areas that Insurers must focus on during the next twelve months. Firstly, sustaining and advancing digital proficiency should be an ongoing element of any strategic plan. Just because the industry has been resilient this past year does not mean that it can rest on its current technological laurels. Having a robust and agile digital infrastructure that can flex rapidly and with ease should be on every COO’s agenda.

Secondly, assessing emerging risk exposure and assessing portfolios in unparalleled detail at a macro-level will become the key differentiator for those who want to thrive. The latest advances in exposure management and aggregation software allow carriers to assess potential losses across all business classes providing real-time analytics and exposure assessment metrics.

3. Regulatory changes

The last few years have seen the Bermuda Monetary Authority committed to promoting regulatory reform to stimulate the adoption of innovative technology in the island’s reinsurance sector. Regulatory changes such as the IFRS 17, which is less than two years away, remain a concern for some insurers. As one participant pointed out, Bermuda’s reinsurance companies do business in over 150 countries, so it’s essential to ensure that those markets don’t have any conflicting regulatory standards.

Participants discussed how they respond to the regulation and how it affects the returns they can make. One speaker declared that “in Covid, for example, with all these regulators all over the world you’re getting different versions of the same data request all at the same time, and when you got 30-40 of them hitting and you need to figure out to respond, you think, isn’t there a more efficient way of to do this?”

One participant pointed out that having a flexible technology environment to respond and create reports against external regulatory and compliance requests is fundamental.

These are only just some of the highlights from this lively and insightful roundtable, and we highly recommend you watch the videos for the full discussion. Watch this space.