Technology a vital tool for reinsurers facing multiple market challenges

More than half of respondents to Xuber’s latest Global Reinsurance Survey 2015 are planning major IT investment over the next 18 months, in line with the fact that two-thirds of those polled agree or strongly agree that technology drives the success of their businesses.

Xuber, Xchanging’s international insurance software business, released the third and final chapter of the survey Thursday, Chapter 3: Information Technology and Regulation, notes a post on the company’s website. [click image below to enlarge]

Xuber surveyed executives – reinsurers, insurers, brokers, regulators, industry organizations, lawyers, insurance-linked securities (ILS) investment managers, analytics firms and modellers – working in the reinsurance sector in Canada, the United Kingdom, the United States, Bermuda, Channel Islands, Cayman Islands, Germany and Switzerland.

The survey found 53% of respondents are planning a major investment in IT in the next 18 months, 31% were not, and 16% did not know. One major international player said: “Our company has an ongoing investment strategy in IT systems globally, which allows us to provide an appropriate ongoing service to our clients and carriers.”

Related: Cultural integration biggest challenge facing global reinsurers with M&A’s: Xuber study

Compliance is a strong driver of IT investment, survey responses show. Xuber points out that 35% of respondents say they are planning to invest to ensure their firms will be compliant with impending regulations.

With regard to the health of businesses, asked to respond to the statement – Technology drives the success of my business – 29% of respondents strongly agreed, 37% agreed, 21% neither agreed nor disagreed, and 13% disagreed.

One executive said: “Going forward, with pressure on expense ratios, this will be more true, and IT, systems, operational efficiency, analytics, pricing, reserving, accumulation technology and (enterprise risk management) will be more important.”

That does not mean, however, that reinsurance is not a people business and that, as such, people will not continue to play a vital role. “It’s still not as valuable as the human capital that we have, but in terms of efficiency as we grow, it’s a key driver,” an executive is quoted in the report as saying.

In the wake of challenges in the current market – including third-party capital, soft market conditions and impending regulation around the globe – Xuber reports that “the reinsurance industry has recognized technology will be a vital tool in the quest for survival and success.” [click image below to enlarge]

The soft market shows no sign of waning and the pipeline of alternative capital that provides buyers with other sources of risk-bearing capacity continues. Add to those challenges that regulation has become a more pressing and expensive concern for reinsurers, and the quickening pace of mergers and acquisitions that is transforming the market and number of companies operating within it.

“Confronted with this barrage of challenges, it is not surprising that reinsurers are turning to technology to help them navigate these choppy waters,” notes Xuber.

Asked what changes executives would make to improve the reinsurance industry, responses included the following:

• invest in disruptive technology and techniques to speed disintermediation;

• have governments move risk out of government-managed programs into the private sector;

• focus on the next generation of practitioners; and

• lose the complacency and enforce stricter underwriting discipline. 

Related: Ongoing soft market conditions major challenge facing global reinsurers: survey

“In its never-ending quest to leverage present-day technologies, the reinsurance sector must not be afraid to consider ‘next-generation innovations,” Xuber executive director Chris Baker says in the statement. “Firms that effectively harness technologies and the opportunities they offer are destined to be among the industry winners, leading the way toward growth and prosperity,” Baker says.

Adds the report: “Those that fail to keep current with technology risk falling further behind other (and complementary) industries by relinquishing their leadership positions to newer players – not necessarily from within the traditional industry – and who are programmed to employ resources, the likes of which the reinsurance industry has yet to tap into in earnest.”