Data quality critical to avoid falling victim to reinsurer generalisations

Cedants must focus on data quality to avoid becoming the victims of “broad reinsurer assumptions" at renewal, according to reinsurance placement platform Supercede.

In its whitepaper — formed in conjunction with a number of market players — Supercede highlighted that account-by-account underwriting is much less common than previously thought, with “special treatment” from reinsurers requiring timely, accurate and relevant submission data from cedants.

Supercede felt the market echoed the sentiment of Aon’s head of analytics, Mike van Slooten, in an Insurance Institute of London report earlier this year.

He said: “Cedants must focus on data quality to avoid becoming the victims of broad reinsurer assumptions.”

Respondents said contravening these broad assumptions typically required an underwriter to “stick their neck out”.

Supercede said that discounts would only be forthcoming if underwriters had the numbers to support and defend their decisions.

Eric Jenck, CUO and head of global lines at Scor, said: “Special treatment must be earned: account-by-account underwriting is much less common these days, and only happens if you have evidence for the portfolio management actions you claim to have taken.”

Interview respondees emphasised that good data is a prerequisite for underwriters putting down larger lines.

Reliable data was said to empower reinsurers to explore larger, more proactive partnership, in turn allowing reinsurance brokers to push for the best possible terms.

Supercede said this could be particularly important in a hard market, when capacity is most selective.

“If you have a company that you have all the info on and is part of your risk appetite, you’re really ready to put in the maximum capacity you can; however, if there are still grey areas, you pass or start with a smaller share,” Florian Bricka, VP treaty underwriter at PartnerRe.

The reinsurance placement platform explained that reinsurers show no hesitation in adding 5 percent or 10 percent to the modelled technical price if the data is lacklustre.

This can compound to pricing well above the market rate, as reinsurers were said to consistently take a conservative approach in the event of unexplainable data discrepancies.

Hetul Patel, chief actuary of Liberty Mutual Re, said: “‘Pricing loads’ are often implicit – actuaries and underwriters will make conservative assumptions to allow for uncertainty in the data and risk. This will be built into the technical price.”

The white paper — titled The Reinsurance Data Crisis — includes further analysis and insight into (re)insurance data practices. It can be downloaded here.