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Technology: The Springboard to Innovative Treaty Underwriting

Cautious optimism surrounds the January 1, 2020 reinsurance renewals, with expectations that the anticipated hardening of rates might be realized – to a modest degree at least.

Reinsurance underwriters who can harness technology to conquer historic risk assessment challenges – including robust marginal impact analytics, and create the space for innovation can build customer relationships that are resilient to future market rate oscillations.

The capital influx to reinsurance markets, triggered by low market returns globally, has led to increased limits and more generous terms being offered without commensurate increases in rates. This trend can only last for so long before having dire effects on reinsurer profitability. 

Profitability in the primary insurance markets has been helped by innovation, with new product offerings linked to enhanced risk assessment techniques like telematics. But while the insurtech wave has propagated hundreds of companies and ideas focused on primary insurers, progress in “reinsure-tech” has been limited, due primarily to the current soft market. These market conditions have constrained resources available for speculative investments and has limited the reinsurer’s ability to pursue potential upside in the fast-moving tech space.

Almost ironically, in response to the market conditions, companies have instituted cautious underwriting approaches still rooted in low-fidelity risk assessment techniques, which haven’t evolved to capitalize on the technological advances made since the market softened at the start of the decade.

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