Enhancing re/insurance through the vital role of data

“Data is essential to the advancement of our industry. It sharpens our understanding of risk, empowers insurers to deliver better solutions, and drives us closer to bridging the global protection gap once and for all.”

That is the opinion of Bertrand Romagne, chief executive officer of International, Reinsurance, at AXA XL Re. Despite significant progress, Romagne noted, many companies and individuals around the world remain uninsured. By optimising models and pricing strategies, the re/insurance industry can enhance accessibility and provide better coverage for those in need.

He emphasised the transformative power of data, highlighting its essential role and the value it brings to the industry, and adds that cedants able to access better data and share it with their reinsurers can—in some cases—get favourable terms and pricing. “That should be the incentive,” he said.

Substantial advancements have been made globally in data quality and utilisation—but progress varies by geography. According to Romagne, the US leads in data quality, followed closely by Europe, Japan, and Australia. “Asia still has some progress to make compared to other regions, but the overall advancement has been remarkable,” he said.

Accuracy matters

Romagne underscored the complexity of data-gathering in the insurance sector, differentiating it from the work done by reinsurers. “It is essential to recognise and appreciate the tremendous effort that insurers invest in gathering data,” he explained. 

“Without accurate data, we can’t build optimal models.”

Unlike reinsurers, who typically analyse structured data, insurers manage vast amounts of customer information, making their task significantly more intricate. “We should celebrate their progress while acknowledging that there is still work to be done.”

Why should the industry strive for better data? For Romagne, the answer lies in the core objective of understanding risk. Enhanced data allows the industry to tailor coverage more effectively, ensuring that treaties align with the right limits and frameworks. 

Accurate data empowers reinsurers with the information to price their offerings appropriately, enabling them to differentiate their portfolios more effectively in a competitive market.

“When we request specific details—such as a building’s age, height, or proximity to a river—this data plays a crucial role in our risk assessments and modelling,” Romagne said. “Without it, we often have to rely on safety margins, which can drive up costs.” 

This cyclical relationship between data accuracy and pricing is essential. “To reduce these margins, we need better data. Without accurate data, we can’t build optimal models, and without those models, we can’t offer the most competitive pricing,” he explained.

Romagne noted that there are nuances in data quality across different lines of business. While there is significant focus on property-catastrophe data, other sectors, such as casualty, often provide more granular details on exposures and coverage. 

“For example, aviation data includes extensive regulatory information, providing greater precision,” he explained. “In contrast, property data can sometimes lack the specific location details that are crucial for informed underwriting decisions.”

Data evolution

Romagne is optimistic about the strides made in data quality over the last five years. “Our portfolio now includes a much higher percentage of geocoded locations than before,” he said. “In the past, we might have known only whether a risk was in a particular province, but now we are starting to obtain more precise geolocation information.” However, challenges remain, such as understanding different construction types and other details that influence risk assessments.

“Technology has played a pivotal role in this evolution,” Romagne noted. “We now have advanced databases capable of handling millions of entries, greatly enhancing our ability to analyse and manipulate data. The days of relying solely on spreadsheets are over; we now utilise SQL databases to manage vast amounts of data efficiently.”

Despite these advancements, the industry often encounters pushback related to data privacy concerns. Regulations in territories such as Europe and China can create difficulties in sharing data. 

“My message to clients is that while we must respect these privacy concerns, we shouldn’t let them hinder our progress in improving data utilisation,” Romagne emphasised. “It’s essential to find a balance that upholds data privacy while allowing us to share information to enhance our business.”

Romagne concluded by stressing that understanding the importance of data is not an internal concern only for insurers. “It serves our clients by differentiating their offerings in the market. The more effectively we use data, the better we can enhance the entire insurance transaction process,” he asserted.

“As the reinsurance industry continues to evolve, the vital role of data cannot be overstated. By prioritising data quality and embracing technological advancements, insurers and reinsurers alike can bridge the protection gap and create a more inclusive insurance landscape,” he concluded.

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Bertrand Romagne is the chief executive officer, International, Reinsurance at AXA XL. He can be contacted at: bertrand.romagne@axaxl.com