Although the last financial crisis made transparency a “must” for financial service providers, the reinsurance industry has long found transparency to be a precious asset.
Transparency helps reinsurers comply with government regulations, such as determining an adequate capital basis for financial strength. With the right data and insights, reinsurers can also better inform rating agencies, manage risk more effectively, and make better decisions about new business opportunities. The ability to gather, review, interpret, and analyze data is thus a critical success factor for reinsurers. It has become increasingly important in risk allocation networks – where reinsurers must decide how much risk to assume themselves and how much they should cede to network peers or the capital markets.
To acquire the information they need and use it effectively, reinsurers must efficiently manage the huge (Big Data) volumes of information at their fingertips for analysis and reporting. They can then use this information to create real-time insights that help executive managers, underwriters, asset managers, and other stakeholders make appropriate business decisions.
Big Data in action
For many years, as an example, reinsurers have modeled scenarios for natural catastrophes to determine the potential impact of hurricanes and other disasters on their risk portfolio. These models are fed huge amounts of data from different source systems – from underwriting experiences and loss metrics to actual histories of the catastrophes. The greater the amount of qualitative data that reinsurers can process about natural events and portfolio risk, the more successful they will be in making decisions about risk retention and distribution related to those events.
Similarly, reinsurers that can effectively analyze the behavior of long-tail claims can optimize their reserving processes and better secure the financial strength of their companies. Accurate, real-time measurement of company performance helps reinsurers take timely corrective measures, such as reducing retention limits or changing investments for greater capital availability.
New information technologies
More than half (53%) of reinsurers and other companies polled by SAP Performance Benchmarking report a gap between their access to Big Data and their analytics capabilities. As demand for transparency and effective management of Big Data increases, however, new technologies are emerging to help reinsurers gather and manage their information to gain real-time business insight.
Using solutions such as the SAP ERP and SAP Business Planning and Consolidation applications that leverage the SAP HANA platform for established analytics and data modeling, companies have increased insights into Big Data by 40%, according to SAP Performance Benchmarking. Tools like SAP Business Process Management software help reinsurers connect their risk evaluation, retention, and pricing process with processes for underwriting, claims, risk, and asset management. Such tools support the interchange of qualitative information among various stakeholders for optimized decision-making in the allocation of risk.
Technology such as the SAP HANA can help reinsurers gather and process information for real-time insight. In addition to modeling natural catastrophes, reinsurers can properly invest their assets and make strategic decisions about entering new markets and lines of business.
With this kind of support, reinsurers can transform the management of Big Data from an overwhelming challenge into a valuable asset for risk management that can significantly enhance their performance.
To learn more about how we can help you with your business challenges please have a look at SAP’s Solution Explorer for the Insurance Industry: https://rapid.sap.com/se/#vm?indids=i_insurnce&lobids=all
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