Untrustworthy data driving sizeable hike in reinsurance premiums

A pressing issue across the industry comes under the spotlight in a new whitepaper released by reinsurtech Supercede: the silent crisis of unreliable reinsurance data and its costly implications for cedents.

The firm delved into this challenge by conducting interviews with over 30 senior global reinsurers, brokers, and cedents. The findings revealed that subpar data is more than a mere inconvenience; it is a substantial financial burden on results. Cedents are directly bearing the cost through escalated reinsurance expenses, reduced capacity, and missed opportunities for innovation.

Rewards and punishments

Across the industry, Supercede revealed unity across reinsurers in what to expect from their cedents: improvements in the standard of submission data. Those which do so stand to be rewarded, provided they continue to provide better data, while those who do not will continue to be punished.

Research cited by the whitepaper unveiled that the quality of submission data varies heavily across the market, with most of the respondents noting substantial variation even in the same regions and business lines. With poor-quality data comes consequences, which affect not only cedents but brokers and reinsurers as well.

The foremost of these is price increases, with “pricing load” becoming standard as reinsurers face more uncertainty that comes from substandard information. Brokers and underwriters, on the other hand, will see postponements for value-adding analytical activities to allow time for manual data manipulation, with this inconvenience ultimately ending in lower goodwill.

With these challenges becoming prevalent, reinsurers are looking for a rise in the bar for quality, with most keen to invest in modernised portfolio management tools that depend on accurate data to operate. Cedents and brokers are doing their parts as well, with entities using new technologies to drive a rise in submission quality.

“We want to be in a position to reward cedents for providing us with good data in our pricing; unfortunately, at the moment, we often have to include uncertainty loads for poor or incomplete data,” said Jonathan Gale, reinsurance chief underwriting officer at AXA XL.