Do All Roads Lead to Reinsurance?

Why do reinsurance brokers send zip files containing spreadsheets to their clients (the cedent) and to their markets (reinsurers)? And why are reinsurers happy to receive that submission data, which powers billion-dollar decisions, in those zip files containing spreadsheets? Why, in our industry, do our highly intelligent colleagues spend so much time unzipping, copying and pasting data from one spreadsheet into another?

It’s astonishing when you stop and think about it. And it made us ask, why?

Is it a lack of funding?

Certainly not in our industry, where manually adding countless zeros to the ends of eye-watering numbers has become part and parcel of the profession. Not to mention an industry where loosely-committed committees routinely invest millions of policyholder contributions into industry modernisation projects, with somewhat dubious outcomes.

Is it because they aren’t aware of the problem?

Also not likely, given that our industry’s inefficiencies have spilled out of our industry’s trade press and into the mainstream media on numerous occasions. Despite this, a shocking proportion of the expense ratio remains attributable to people doing manual copy and pasting work that a computer, in principle, could do for them. What’s more, the industry spends copiously on top of that on legacy IT improvements, despite the common observation that the vast majority of these projects do not yield results, but rather, dig the problem deeper.

Is there a viable alternative to zip files full of spreadsheets?

Yes, there is, and the technology has existed for a couple of decades. APIs, or application programming interfaces, are how tech-savvy companies exchange information in almost every other industry. Salesforce launched the first major public API in the year 2000 – that’s more than twenty years ago – and nowadays, they make up the muscle of most online exchanges, handling data push and pull requests that traditionally had to be entered and extracted manually.

So what’s stopping the reinsurance industry from making progress?

Could all brokers and reinsurers start building connections between each others’ systems to enable data sharing? Or even just the largest?

Imagine this:

  • Aon, for example, builds some clever tech to share cedent submission data (premiums, rate changes, claims list, bordereau etc.) directly with, let’s say, Munich Re’s system, so that the reinsurer can auto-magically scoop the data into its internal loss modelling and pricing tools to quote and send back information to Aon.
  • Guy Carpenter presents Munich Re with their own similar solution
  • Willis Re (or now Gallagher Re) does the same

At this point, Munich Re has three separate integrations to manage, each with data organised in a different way, meaning no single point of entry. Each and every cedent now, too, is required to prepare data in a particular way to meet the needs of a given broker and the given reinsurer they have established a ‘clever’ means to trade with.

It’s not hard to imagine how complex this becomes if Swiss Re, Hannover Re and SCOR start doing the same too. At this point we have three brokers and four reinsurers, creating twelve integration touch points. And in a market with hundreds of other brokers and reinsurers around the world wanting to trade with each other, very quickly this gets extremely complicated and expensive indeed.

How could this be simplified?

  • Is it possible that one of the brokers builds a proprietary system for digitally sharing data (broker portal) and then allows other brokers to use it too? Not likely, and even less likely that other brokers would be willing to put their data through a competitor’s system.
  • Is it possible that one reinsurer builds a proprietary system to accept data (reinsurer portal) and allows other reinsurers to use it too? Again, very unlikely, for the same reasons.
  • Is it possible that all of these players can sit in a room and come to an agreement to build something pragmatic? If such a nirvana is possible, it is not close by. The reliance on sustained unanimity of vision, eschewing of ego and prioritisation of co-opetition amongst so many merging and evolving players – not to mention the need for governance structures that threaten to collapse under the weight of their own diaries – makes holding even the first meeting an unforgiving and expensive undertaking.

All of this can be likened to the problem of building roads. Yes, roads.

When you drive your car from your house to the supermarket, you don’t build a dedicated road that goes directly from your house to the supermarket, do you? Because if you did that, you’d have to build hundreds of roads going from your house to all the different places that you wanted to visit. Instead, a neutral body builds roads for all to use, and even maintains those roads (let’s ignore those lingering potholes in this analogy). The roads are therefore “standardised,” meaning that they will be suitable for different people using different cars.

Could all roads lead to reinsurance?

  • What if a neutral party built the roads to serve everyone’s houses and businesses (Aon, Guy Carpenter, Swiss Re, Munich Re, Hannover Re etc.)? Neutral in this case would mean, not affiliated to, or owned by (investment wise) any of the players in the industry. An independent solution.
  • What if this party focused on building the roads and painting the road markings consistently for the data, so that every counterparty is connected to just one neutral platform, maintaining just one integration in total instead of one for every broker-reinsurer relationship?

Sound aspirational? Not at all.

This is what we are enabling at Supercede. Our road system allows any broker to send data to any reinsurer, in a modern and efficient way (no more zip files). We also allow any cedent to share their data with their broker in the same fashion. Our solution is not theoretical, it is live and in production and being used by cedents and brokers at this very moment.

Why do I personally care about this?

I used to be one of the actuaries who had to sit unzipping, copying, and pasting data instead of focusing on the good stuff that I had been trained for. Sixty to seventy percent of my time was spent just getting data out of broker spreadsheets, into internal spreadsheets, and I have a PhD in physics. Our industry is full of bright, intelligent people and I want them to be able to focus on doing intelligent things, rather than fiddling over data.

Yes, we may be one of the oldest industries in the history of modern civilization, but that doesn't mean we have to suffer the oldest systems and processes.

Come check out our road system at supercede.com, or better yet, let me take you for a test drive.

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Jerad Leigh
Ben Rose
Ellenie Chan
Jess McCausland
Paul Bassan
Cordy Bartlett
Tom Spier