Insureware: tools to quantify trends and volatility

With material increases in uncertainty, reinsurance providers need tools that not only quantify the trends in the business, but also accurately describe the volatility characteristics of the business, says David Munroe (pictured), chief analytics officer of Insureware. This means that business for the statistical solutions provider is very positive.

“Insureware’s platform, ICRFS, quantifies both the trends and the volatility and, as a result, there has been substantial interest in our software solutions.

“We have been involved in several reinsurance evaluations and due diligence assessments. Our analytical tools are very fast as the turnaround time between the potential reinsurer receiving the data and the delivery deadline for submission of a non-binding indication (NBI), an insurer’s written offer of policy terms and conditions, can be very tight,” Munroe explained to Intelligent Insurer.

He has seen evidence of a hard, or hardening, market and said the conditions of the last few years have resulted in companies taking a close look at underperforming portfolios and their level of risk diversification. There is also a heightened level of caution in entering new markets and/or taking on types of business that are not in the preferred lines.

“In that sense, creative solutions that solve insurers’ capital management along with suitable compensation for the risk transfer to the reinsurer(s) are not as attractive as the ‘tried and true’,” Munroe said.

“An aversion to taking on risk is understandable in times with high uncertainty, but the more knowledge and insights into a prospective risk transfer, the better the decision-making process. The Probabilistic Trend Family (PTF) modelling frameworks allow us to dive deep into the underlying trend structure and volatility comprising a prospective transaction—thus giving the reinsurer confidence in the pricing analysis,” he explained.

A flexible solution

Developments in technology have accelerated in the years during the COVID-19 pandemic as people embraced greater digital working and companies search for the next big thing to give them a competitive edge.

“We are very excited about the latest version of ICRFS, scheduled for release later this year,” Munroe said. “We have completely reimplemented our reinsurance module with the result that reinsurers will be able to comprehensively assess and price the risks they are taking at the segment/line of business level.”

He said the soon-to-be-released solution allows for “extensive flexibility” so reinsurers can write custom products for clients that “create maximum value” for reinsurers and their clients. Contracts can be designed to apply to select accident periods, calendar periods, cap losses for particular periods, structure multiple contracts in a hierarchical framework—and much more.

Insureware’s data management tools and client support from its modelling team mean that reinsurers can provide NBIs within a very tight turnaround time, which greatly enhances value, he added.

On what makes the company stand out, Munroe said the Insureware team is small, but extremely efficient at delivering analytical and technical support to its global client base.

“We come from a diverse range of backgrounds around the world with a plethora of skillsets which are unified to produce our application. Research interests vary just as widely, resulting in ICRFS technology pooling solutions from econometrics, statistics, data science, information theory, physics, and many other schools of knowledge.

“The result is an application which is extremely fast, efficient, and able to deliver time-critical analyses to end users.”

This diverse team engages regularly with the company’s client base to ensure that the ongoing development of ICRFS meets the current needs of actuarial services in the P&C Industry—regardless of location.

With close client engagement and a finger on the pulse of the market, Munroe points to inflation as the big topic that will be on everyone’s lips as the industry heads towards 1/1 renewals.

Another big talking point will be the ongoing ramifications of the cultural shifts that have come out of the shocks of the last few years, he added.

“Each generation has a key defining moment that impacts it more than any other. Behavioural shifts—including working from home, limited travel, and the impact of inflation on purchasing power—are likely to be this generation’s defining characteristic.

“These will have a direct impact on re/insurance portfolios in terms of the type of claims and compensation appropriate for those claims. The 1/1 renewals will be an exciting time for all concerned,” he concluded.