Cracking the code of exposure management for reinsurers

As reinsurers and insurers gather in Baden-Baden to discuss January renewals, there’ll be some guesswork involved. Real visibility of exposures is limited, but with new technology solutions, that could be changing. 

If technology hasn’t made as great inroads in reinsurance as other industries, there are good reasons, according to Laurent de la Porte, founder and chief executive officer of Allphins. While the lag is often put down to the sector’s innate conservative or caution, there is a simpler explanation. “The challenges of reinsurance are difficult to address,” he said. 

The data collected by any single insurer is significant, and for a reinsurer with a book of 30 to 50 cedants, the volume is multiplied correspondingly. Moreover, it comes in to reinsurers in a flood.

“You get far more data than any insurer, and you get all this maybe in one month of the year in time for renewal. So you have a lot of bad-quality data to analyse in a limited amount of time. From a technology perspective, it’s very challenging,” he said. 

Collecting, cleaning and analysing the data to extract meaningful insights quickly has been beyond most solutions.

“So far, there haven’t been many technologies that could address that.”

According to de la Porte, however, that’s starting to change. There are now technologies that can provide real support to the industry. 

Among them is Allphins’ solution which, the company claims, is saving its reinsurance clients 10 weeks a year, boosting capacity utilisation by 10 percent and increasing premiums by 3 to 5 percent annually. 

“There are good reasons for companies to start using technology they haven’t been using so far,” he said.

Lifting the lid on exposures

With a background in oil and gas and big engineering and technology firms such as Technip and SLB (Schlumberger), de la Porte started looking at the reinsurance industry about five years ago. 

“We saw that it was not properly digitised, and that reinsurers were asking themselves a lot of questions that were not answered soon enough or to which the answer was a waste of time,” he said.

The main prompt for change has been the advancement of technology and the ability to clean, handle, and analyse large datasets, but two drivers also brought the issue to the fore. 

The first was increased scrutiny from capital providers, markets and regulatory authorities against a backdrop of concerns over the accumulation of exposures and systemic risks. 

It is no longer enough to simply provide estimates of positions based on internal analysis. “You need to provide an exhaustive view of your risks to Lloyd’s, your regulatory authority or retro,” said de la Porte.

The second, not unrelated, driver is the intensification of large events, whether from geopolitical risks, rising cat losses or other classes. “A better understanding of their exposure to large events is important to reinsurers today,” he said.

Allphins aimed to develop a platform for reinsurers that would enable them to put all the risks from the cedants into it and quickly interrogate the data to answer major questions about exposures and the portfolio’s content. 

Considering the options

The firm has made significant progress in some parts of the industry. About half of all energy specialist reinsurers use Allphins’ solutions, according to de la Porte, and good penetration has been seen in the terrorism and political violence market. 

Two use-cases are common: for energy and political violence, reinsurers are using it to manage exposures. 

Drawing on the data from their cedants, they can maximise their premiums while staying within exposure constraints. It lets users “test their options”, explained de la Porte.

The second, particularly on the property and casualty side, is to dive into cedants’ data and explore the underlying exposures, whether to mid-sized European companies, the US tech sector, industrial facilities in Europe, and so on. 

That enables it to identify not only clashes but also misalignment with its strategy and risk tolerances, and promotes more informed discussions—at Baden-Baden, for instance. 

“Instead of discussing the renewal based on two or three datapoints, you can discuss data you have analysed yourself, which is very rich,” he said. “It’s a more fact-based discussion.”

In the coming year and beyond, de la Porte hopes to expand capabilities and spread uptake to other specialty P&C and cyber lines. And, whatever the reputation of the reinsurance industry when it comes to technology, he’s confident it can be done. 

“You sometimes hear that reinsurance doesn’t have an appetite for technology. We don’t think that’s correct. They are very pragmatic people, and if you have something useful for them, they will accept it and use it,” he said. 

“It’s a fantastic time to be in this market when technologies can truly change how people make decisions.”

Laurent de la Porte is founder and chief executive officer of Allphins. He can be contacted at: laurent.delaporte@allphins.com 

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