The last 12 months have seen a dynamic reinsurance market where capacity and capital challenges have meant increased retention for cedants. This has resulted in a number of responses, including increased focus on gross underwriting, better data for portfolio management as well as an increased focus on the ceded reinsurance operations.
Our team at Deloitte has recently supported several organisations to define their transformation journey for ceded reinsurance operations. This survey has been issued to assess the extent to which this trend is prevalent across the wider market and understand the various transformation strategies being deployed in more depth.
Managing reputation in the market (e.g. mitigating the risk of misstatement), maximising the benefit of reinsurance (by minimising recovery leakage) and ensuring targeted and efficient coverage in a market of higher retention levels requires effective reinsurance management. Our survey shows these drivers have generated significant recent transformation spend in ceded reinsurance operations, focused on improving the benefits from data, processes and systems. However, delivering a successful transformation outcome is no small feat given the historic underinvestment in this area.
We can summarise the key the trends with the following observations:
Many insurers are spending upwards of tens of millions of dollars transforming their ceded reinsurance operations. Those who have underestimated what is required or haven’t started should consider developing their case for transforming their strategic ceded reinsurance capability. According to our survey, the risk of misstatement and the desire to accelerate reporting timetables are currently the most important drivers for prioritising investment in ceded reinsurance transformation, but most have also realised that any investment in ceded reinsurance transformation pays for itself by helping to reduce recovery leakage, which is deemed prevalent in the market.