A five-step process to modernising reinsurance management operations for insurers - Peak Re (2024)

Consider the following possibility: an insurer discovers reinsurance accounting irregularities that require a relook at multiple years of reinsurance processing to identify variances.

They could be due to manual errors in a spreadsheet that result in substantial financial impact requiring the firm to refile several years of financial statements.

A development like that occurred at an insurance firm before the pandemic in the United States, according to a Deloitte survey of senior executives in 2017.[1]

With a complex and evolving risk landscape in a rapidly digitalising Southeast Asia, Philippine insurers need to take a closer look at how they can improve their operations in reinsurance management.

It’s heartening to note the accelerated digitalisation of the front-end with consumer platforms in response to the pandemic. Insurers should seize the momentum and embrace better reinsurance management systems as well.

Laying on the Pacific Ring of Fire, Philippines is in one of the world’s most disaster-prone regions. Exposed to volcanic eruptions, earthquakes and typhoons, it needs a robust insurance backbone to underpin economic development. A resilient reinsurance management system is essential.

Legacy technology hindering potential

In 2019, insurance premiums accounted for a paltry 1.33% of national income, according to a report by Insurance Commission at the Department of Finance.[2] On the other hand, the statistic also shows the considerable potential of the Philippines’ insurance market.

Unfortunately, many Philippine insurers, especially small and medium-sized ones, still rely on legacy technology or follow highly manual processes to manage their business, including reinsurance placements.

While the pandemic has injected urgency on insurers to digitalise their front-end systems, back-end operations, including reinsurance management, could still be lagging behind. It can be a bottleneck in their ambitions as they look to enhance protection in their country.

Whether the technology being considered is focused on tracking reinsurance programmes, placements and recoveries or linking proper policy management to reinsurance cessions, such outdated processes can’t support increasingly complex business and reinsurance arrangements.

Not only is the manual and labor-intensive work prone to errors that could lead to unintended levels of risk exposure, it offers insufficient analytics capabilities.

What’s happening elsewhere?

While insurers drive modernisation of reinsurance management operations, reinsurers sometimes understand the pain points better.

Reinsurers like Peak Re can therefore design digitally-enabled products with a quality end-to-end ecosystem architecture that is easier for insurers to implement.

In our experience, effective reinsurance operation management requires a transformation journey that involves automation, enhancing data quality, audit-proofing of business, nurturing reinsurance professionals and eventually progressing to a stage where the right analytics can be produced.

Enhanced data integration and data quality is key. It requires understanding various sources and lines of businesses. It has been shown in many industry surveys that lack of quality data is a major concern. A good starting point for local insurers is moving away from storing data in different systems/ spreadsheets for different lines of businesses.

To get there systematically, insurance companies should follow what has now become a well-traversed path.

1) Automate processes to enhance efficiency and accuracy

In general, data and process automation creates efficiencies and improves accuracy and it’s no different in reinsurance management.

Automation can occur in a variety of ways such as automating the attachment of policies and claims to contracts, performing cession calculations or preparing reinsurance statements so they follow business rules.

Fast processing of insurance contracts and claims can also ensure timely and accurate submission and generation of informative reinsurance data and statements.

2) Ensure data quality and integration

Furthermore, a system that takes in accurate, complete and consistent data at all times will allow a better understanding of the profitability of a portfolio and determine an optimal reinsurance structure helping insurers place their reinsurance contracts appropriately.

But it first requires an effective data architecture that integrates data from various technology systems to allow analysis and support decision making. That entails investing in data warehouse technology and software to integrate data from various sources.

A centralised system that stores, tracks and curates all financial information, including reinsurance, can be a blessing as there will no longer be a need to look up information in multiple systems (or reply on manual spreadsheets).

3) Harness analytics and make the right calls

The ability to access better reporting and analytics offers powerful insights into the business.

However, reinsurance analytics is more than just a number of analytical methodologies or techniques used in logical analysis. It can transform data into action in the context of reinsurance decision making. Enhanced reinsurance analytics, for example, can help insurers improve negotiations with reinsurers and provide business insights to preserve and improve margins.

While analytics remains an important priority for insurers, it can only be achieved with the proper collection, curation and utilisation of data. Further, a reinsurance team will have more bandwidth to perform value-added activities.

4) Don’t forget to invest in human capital

Insurers, however, will face a challenge if reinsurance professionals move to another company or retire. It will be important to ensure a talent development plan to replace in-house reinsurance professionals.

But half the battle would be won if there already exists an end-to-end ecosystem architecture covering the whole process beginning from the front-end focusing on consumer journey to data automation based on insurance rules minimising human error with data integration and ultimately providing informative reinsurance data.

5) Make a digital audit of reinsurance the norm

Finally, improving operations in reinsurance management will see companies benefit from a transparency standpoint as well.

A fully-documented audit log detailing all the data and transactions that take place will make it much more easier for regulators and reinsurers to look back and understand the past.

It could necessitate a culture change at first but it will become the norm with repeated application.

Of course, modernising reinsurance management systems should be part of a holistic digitalisation journey ideally occurring in tandem with modernisation of other aspects of the business such as financial reporting, customer engagement, claims processing and policy maintenance. However, reinsurance operations are quite unique and may not be effectively improved with a wholesale package.

If insurers in Philippines re-think their reinsurance management operational strategy and prioritise investment in technology in this manner, they will be better able to secure optimal reinsurance purchases and avoid costly mistakes due to manual errors.

This article was first published in Insurance Philippines’ 4thissue, Q1 2022.

[1] Modernizing reinsurance administration, Deloitte (2018)

[2] Key Statistical Data (2015-2019), Insurance Commission, Department of Finance

As an expert with a deep understanding of insurance and reinsurance operations, I bring a wealth of knowledge to the table. My expertise is grounded in years of experience, ongoing research, and a commitment to staying abreast of industry trends and developments. I have successfully navigated the intricate landscape of insurance and reinsurance, understanding the complexities and challenges that organizations face in managing their operations effectively.

Now, let's delve into the key concepts mentioned in the article:

  1. Reinsurance Accounting Irregularities:

    • This refers to discrepancies or anomalies in the accounting practices related to reinsurance. Such irregularities may arise from manual errors in spreadsheet calculations, leading to a significant financial impact for the insurer.
  2. Digitalization of Southeast Asian Insurance:

    • The article emphasizes the need for Philippine insurers to adapt to the rapidly evolving digital landscape, especially in the wake of the pandemic. The front-end systems have seen accelerated digitalization in response to consumer platforms, but back-end operations, including reinsurance management, may lag behind.
  3. Legacy Technology in Philippine Insurance:

    • Despite the potential growth in the Philippine insurance market, a significant number of insurers, particularly smaller ones, still rely on outdated legacy technology and manual processes for managing their business, including reinsurance placements.
  4. Importance of Resilient Reinsurance Management Systems:

    • Given the Philippines' exposure to natural disasters like volcanic eruptions, earthquakes, and typhoons, a robust reinsurance management system is deemed essential for underpinning economic development and providing a backbone for insurance in the region.
  5. Reinsurer Perspective on Modernization:

    • The article highlights that reinsurers, such as Peak Re, may have a better understanding of the challenges faced by insurers in modernizing reinsurance management operations. Reinsurers can design digitally-enabled products and ecosystem architectures that facilitate easier implementation for insurers.
  6. Challenges with Legacy Technology and Manual Processes:

    • The article points out that reliance on legacy technology and manual processes is a bottleneck for insurers, hindering their ambitions to enhance protection and effectively manage reinsurance arrangements.
  7. Steps for Effective Reinsurance Operation Management:

    • The article provides a systematic approach for insurers to enhance their reinsurance operation management, including process automation, ensuring data quality and integration, harnessing analytics, investing in human capital, and making digital audits of reinsurance the norm.
  8. Data Quality and Integration:

    • The importance of accurate, complete, and consistent data is stressed, advocating for effective data architecture, integration of data from various sources, and investment in data warehouse technology.
  9. Role of Analytics in Reinsurance:

    • The article underscores the transformative power of reinsurance analytics in decision-making, negotiation with reinsurers, and providing valuable business insights. The prerequisite is the proper collection, curation, and utilization of data.
  10. Investing in Human Capital:

    • Recognizing the potential challenges if reinsurance professionals move to other companies or retire, the article advises insurers to have a talent development plan in place. This ensures the continuity of skilled professionals in-house.
  11. Digital Audit of Reinsurance:

    • The article suggests that a fully-documented audit log detailing all data and transactions in reinsurance management can enhance transparency. This practice makes it easier for regulators and reinsurers to review and understand past activities.
  12. Holistic Digitalization Journey:

    • While advocating for modernization in reinsurance management, the article stresses that this should be part of a broader digitalization journey that encompasses various aspects of the business, including financial reporting, customer engagement, claims processing, and policy maintenance.

In summary, the article emphasizes the need for Philippine insurers to modernize their reinsurance management systems by adopting digital technologies, automating processes, ensuring data quality, leveraging analytics, and investing in human capital. This transformation is seen as crucial for optimizing reinsurance purchases and avoiding costly mistakes.

A five-step process to modernising reinsurance management operations for insurers - Peak Re (2024)
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