Data work continues amid the M&A thunder and lightning

Megadollar deals between reinsurers happen between the gods up on Mount Olympus, but down here we’re focused on how to get better data into transaction systems, says Frank Fortunato, chief executive of CATEX.

Ahead of the industry’s big meeting in the stunning surroundings of Baden-Baden, it is perhaps worth reflecting on the events of the last few months.

At the very hot tables of the Café de Paris in Monte Carlo in September the usual one-on-one speed dating meetings continued and, in spite of the warm weather, all seemed like business as usual.

But appearances can be deceiving. Three ‘known unknowns’ that we have now learned about indicate that significant activity was occurring below the ‘business as usual’ surface.

We’ve learned that serious talks between several large reinsurers were nearing an end game. Negotiations nearly resulted in three very big deals.

The one deal that did occur was a bit of a blockbuster. Endurance is to be acquired by Sompo for a price 45 percent higher than its listed share price on the NYSE—more than $6 billion. But the deals that didn’t occur might have ranked as blockbusters too. Markel apparently was close to acquiring a large rival; there had also been high level talks between Generali and AXA, according to market rumours.

These are the ones we knew of. What else was, or is, being discussed falls within the ‘unknown unknowns’ category.

There seems to have been a lot of what the British would call ‘soldiering on’ by reinsurers and brokers determined to put the best face on a market that has suffered declining premiums and expanded competition from insurance-linked securities (ILS) capital.

The only group that actually seemed pleased were the buyers, who once again found themselves very popular.

Not once in our many meetings did we hear a hint of further mergers and acquisitions activity for 2016. Any speculation might have been dismissed as folly because of the proximity of the January renewals.  

It just goes to show—companies will do what they need to do if opportunity presents itself. It’s no secret that bigger is better and the more diversified your risk profile is the better opportunity you have to make money.  


Down in the real world

From our perspective, multibillion dollar deals between reinsurers are things that happen between the gods up on Mount Olympus, far away from our own little world. We see occasional lightning bolts up on that mountain but we’re occupied with the basic blocking and tackling of the industry—focusing on how to get better data into underwriting and transaction systems.

There was great interest among everyone we met about our solutions. Building an underwriting powerhouse that is worth billions will always start with the risk and how it’s priced. To do that and do it profitably, means it’s essential to have accurate, clean and validated data.

No-one knows this better than underwriters and in these times of declining premium rates the pressure to produce an underwriting profit is more intense than usual. Better data is key to pricing a risk accurately or deciding to walk away from it.  

Our Data Vera application automatically cleanses and validates imported data per selected business rules and provides a complete audit trail for every data change the application makes on its own or proposes for review. Data Vera learns as it goes and keys on to choices the user has made in the past for the same data error sent by that same data sender.

Tens of thousands of data cells on an Excel spreadsheet, for example, can be reviewed in a matter of seconds and then converted to any destination format of choice. This process happens without the need for laborious and error-prone mapping of data to templates. Data Vera can also analyse incoming data for an initial review by an underwriter, using a variety of metrics, prior to binding.

At the end of the day we feel proud to be able to help provide our tiny bit of the puzzle.

If our applications help underwriters to make better decisions then we’ve done our job. We do see the lightning and hear the thunder from Mount Olympus but we know that solid information about the risk is one of the keys to the whole puzzle. The gods, it seems, haven’t forgotten this basic fact either.

Frank Fortunato is the chief executive of CATEX. He can be contacted at: ffortunato@catex.com