London reinsurers moving data on to new platforms face tough decisions

London reinsurers moving data on to new platforms face tough decisions 768 256 Davies Group

//This article was first published by Insurance Day

The pressure to replace technology systems will increase as the importance of outwards reinsurance programmes grow alongside the risk of a risk-based regulatory regime. 

These could truly be described as interesting times for companies in the London market. Brexit aside, London is driving change both internally and externally and while change delivers opportunity, it also comes with challenges.

Externally, Lloyd’s has made some conscious decisions about what it is willing to underwrite. As we have seen in recent months, Lloyd’s syndicates and managing agents have been withdrawing from lines of business, both in line with Lloyd’s strategy and to redeploy capacity.

This comes against a backdrop of the market driving new technology and seeking to transact business electronically. The speed of transaction and the speed with which clients no longer demand but expect response has added impetus to the market’s desires to move away from paper-based working.

The London market has also been working towards a new Target Operating Model (TOM) and that move has created pressure on insurers to look at how they can encompass the requirements of the TOM in their business. We have successfully assisted more than 12 carriers in the UK and overseas market to deliver their Reinsurance TOM, supporting them through their reinsurance software transition. 

The market is not a simple one as those firms have built their systems on a variety of reinsurance software platforms including XLPro, XLRas, Sequel Re, ProCede and Elgar. It has allowed third party service providers to gain an insight into the requirements reinsurers have to consider as they look to make this transition.

Tackling legacy issues 

The biggest drive remains the reinsurer’s desire to modernise their systems and tackle legacy issues. It is no surprise that many firms still need support to move from a spreadsheet to the implementation of a full system, as well as the movement of legacy system data to a new system or to migrate part of their existing system to a new platform.

Valuable lessons have been learned. In our experience, before any migration, the key to a smooth transition lies in preparation. Most delays are caused by issues with existing data, be that ceding data, coding or inaccuracies within the reinsurance results themselves. 

The firm should undertake a thorough review of the health and structure of its data. What this achieves is the ability to validate data requirements. The positive aspect of this process is this work can be undertaken a considerable time before the implementation work begins.

Source data needs to be confirmed and the coding requirements will have to be defined. All too often, however, such a review will identify areas where data is incomplete and internal resource shortfalls. Many firms will therefore look to engage with a third party to aid them in the work as they do not have the staff to complete the migration, implementation, or upgrade internally.

There is also the benefit to firms such a move will reduce the impact of the project on their existing internal resources and allows staff to continue in their daily roles. The success of deploying in-sourced project resource depends upon a deep working knowledge and the ability to adapt and integrate. 

Cost

The markets also have to look at the question of cost. But firms that have moved their outwards reinsurance into new platforms have seen benefits that far outweigh the costs of the implementation. The process often finds old recoveries that have been missed but which, once recovered, go to the firm’s bottom line – in some cases funding the new system. 

The Decision by the Lloyd’s market to refocus the classes and the level of capacity it will allow syndicates to underwrite has created a new dynamic for many. All too often reinsurance has been written across classes and the managing agents and syndicates have been tasked with in effect unlocking the policies to more accurately reflect the new risk profile.

It has created a demand for better systems to be in place and we believe that demand will only continue as outwards reinsurance programmes grow in importance alongside the risk-based regulatory regimes.

Management in the London market have some significant decisions to make. There is a recognition of how systems can deliver benefits to underwriters at a time when the market is encouraging participants to drive the use of technology across all market disciplines.

The issues remain, though, of both cost and time. Firms view the cost and all too often do not look to see the cost benefits that can be delivered. The time issue is twofold: first, once the decision to implement a new system is made, how long will the implementation take? Second, do we have the capacity or the necessary expertise internally to successfully deliver the implementation? There is much to consider but the benefits are tangible.

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