Reinsurance in Review: Lessons from 2023 and Strategies for the Future

Happy New Year! Another year over. And what a year it was for reinsurance and the insurance industry as a whole.?

From evolving cyber threats to the looming impacts of climate change, we certainly were not short of challenges last year. What's more, they will not magic themselves away in this new year either. Let's take a look in more detail at what we dealt with last year and how we can learn from it in the year ahead.?

Climate change

In current times, the risk landscape demands an ever so careful balance between assessment and profitability. The escalating frequency and severity of extreme weather events has only amplified this further.?

Thus, the inherent uncertainty in predicting the precise impact of climate change has definitely posed a significant hurdle for reinsurers, complicating underwriting practices and requiring adaptive risk models.

Anil Vasagiri , head of property solutions at Swiss Re suggests not only that the old way of assessing climate risk is no longer effective but also in order to assess appropriately companies have needed to incorporate risk trends in a way which is forward looking, not looking at risk from the past.?

As climate-related risks continue to evolve, reinsurers must learn from the past and continue to adapt their strategies to navigate this dynamic landscape.

Regulatory uncertainty and standardisation

Evolving regulatory frameworks across jurisdictions demand constant vigilance to ensure compliance, which inevitably has introduced complexities in reporting and risk management. It is thought that the lack of standardised practices poses a hurdle for reinsurers while at the same time achieving such standards globally is considered a very hard task indeed.

I've worked closely and am highly hopeful of the success and effectiveness of the ACORD standards. It goes to show that industry players are beginning to really harness the power of collaborative initiatives, aiming to establish common standards that streamline processes and enhance transparency.?

The pursuit of standardised practices will remain integral to fostering a resilient and globally coherent reinsurance sector - something to watch out for in the year to come.?

Cyber risks

There is not much left to be said about cyber security which has not already been said numerous times. Of course, with digitisation comes some new risks in the form of attacks on digital systems and sensitive data. According to research by IT Governance , last year accumulated a total of over 5 billion compromised records in security breaches. That's a lot of data left in jeopardy.?

Thus, there has been a growing pressure for reinsurers to stay ahead in understanding and addressing evolving cyber risks. Continuing to stay vigilant will be crucial this year for safeguarding sensitive data and maintaining the integrity of operations in an increasingly digital landscape.

Three predictions for 2024

It wouldn't be a new year without some speculation of the year ahead. With that in mind, here is what I can see upcoming for reinsurance this year.?

• Further data analytics integration:I think it's fairly certain that this year we will increasingly see reinsurers leverage advanced data analytics and artificial intelligence to enhance risk assessment and decision making processes. In the face of climate change, this integration will lead to more precise underwriting and improved portfolio management.
• Parametric insurance:I believe that parametric insurance models, which are insurance products based on predefined triggers rather than traditional loss assessment, will gain prominence in 2024.?According to Scor , this shift offers faster claims processing and greater transparency especially, again, in the face of escalating climate related risks.?
• Increased collaboration and partnerships:I sincerely hope this is not my wishful thinking as if you know my ideology, you'll know the importance I place on collaboration and communication when it comes to digitisation in reinsurance.?I predict that reinsurers will explore strategic collaborations and partnerships this year in order to foster innovation. This collaborative approach will facilitate the development of new products and solutions, improving overall resilience in the face of emerging risks.

Overall, I want to wish all fellow reinsurance professionals a happy New Year. Let's make it a good one.?

Are you thinking about beginning your digitisation journey this year? ??

It's a surefire way to improve your business operations when done correctly. Don't hesitate to get in touch if you'd like to chat about what ‘correctly’ could look like for your business.?

Send me a message or email me at [email protected]

Posted on https://www.buondrius.com/