Why investment in pricing transformation for reinsurers is more important than ever
The complexities reinsurers are facing are greater than ever. hyperexponential (hx) said this presents them with an opportunity to invest in pricing transformations.
According to hx, January 2023 presented a unique inflection point for the reinsurance sector.
The renewal season was fierce, and an imbalance in the demand and supply of capacity tipped in favour of reinsurers. As such, many were able to reap favourable results after years of sub-par returns.
However, the end of 2022 saw the reinsurance market experience the largest capital squeeze ($66bn) since 2008, restricting reinsurers’ abilities to maximise profitability during their peak season.
This reduced capacity, hx said, will increase reinsurers’ dependence on digital transformations to ensure efficiency in risk pricing and promote revenues. Pricing transformation is key for successful reinsurers.
The combined (loss and expense) ratio is a crucial measure of profitability for (re)insurers, and this is widely recognised across the industry.
According to hx, reducing expense ratios may seem like the more obvious solution, but pricing and underwriting transformation has the potential to generate material improvements in profitability through loss ratio improvements and, as such, generate significantly greater profit than other programmes focused on expense saving alone.
In addition, pricing technology can help insurers make better use of their data.
Reinsurance is one of the most data-heavy industries globally, yet the industry has struggled to unlock the power of its ever-increasing pools of data. This can lead to errors, inaccuracies and discrepancies.
Pricing technology, however, can enable benefits such as real-time portfolio analysis, third-party data integrations, and automated, data-driven risk-triaging.
hx aims to meet the reinsurance industry’s need for pricing agility and help reinsurers unlock value at every step of the pricing value chain.
The company’s next-generation pricing platform, Renew, is enabling data-driven decision-making and maximising profitability for reinsurers across the globe, including leading reinsurers like Convex, Conduit Re, and more.
Find the full post here.
Toward the end of last year, hx released a research report highlighting the importance of pricing transformation for specialty insurers.
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