It’s not just insurtech startups that have an edge on innovation. Some established reinsurers have developed their own analytics and technology divisions that offer a variety of insurtech-type solutions for clients.
Swiss Re, for example, set up such a unit in mid-2017, called P&C Solutions, which aims to help clients to improve profitability by enabling them to make better underwriting and pricing decisions using various tech and data analytics tools. Indeed, its Solutions business is now one of the reinsurer’s three business pillars along with “Core” (or “normal” reinsurance for risk management purposes) and “Transactions” (tailored and structured reinsurance).
While capabilities existed prior to the formation of P&C Solutions, Swiss Re decided to bring its technology and analytics functions under one umbrella that focuses on entrepreneurship, explained Eric Schuh, global head P&C Solutions, in an interview with Carrier Management.
“Now it’s more of a targeted effort because we feel there are a lot of clients out there who are looking for ways to grow or improve their business,” he said, noting that these are goals that are independent of hard and soft market cycles.
(Editor’s Note: Carrier Management interviewed Schuh before Swiss Re announced that Pranav Pasricha, previously CEO of Intellect SEEC, has been appointed global head P&C Solutions, effective Aug. 3, 2020.)
Schuh said that insurer clients seek to add value to their business across the value chain, in areas ranging across distribution, products, underwriting as well as back office and operations.
The division’s principal activities include:
- P&C analytics, which provides portfolio insights for clients’ steering and growth.
- Parametric solutions for earthquake and hurricane with an automated quoting and claims platform.
- A cyber unit that develops cyber insurance products and identifies and manages silent cyber exposures.
- An Automotive & Mobility unit, which, among other things, develops insurance-relevant driver scores using telematics solutions. (See related article about P&C Solutions’ work to develop risk scoring for automated safety systems, designed to reward safer cars with lower premiums).
- A Liability unit that analyzes and models liability portfolios with forward-looking modeling (FLM) for growth into new markets and segments. It also helps clients manage casualty accumulation risks.
- SwiftRe, which provides an online risk placement, claims and accounting platform as well as transparency into a client’s portfolio.
- Property & Specialty, which offers analysis of natural hazard risks and modelling, engineering underwriting with a tool called PUMA, and agriculture solutions.
Schuh explained that Solutions’ clients typically have one or more of three needs: 1) they want to grow their top line; 2) they want to improve their loss ratio and have more technical profitability; or 3) they want to lower their expenses and be more efficient.
These three things together give you a company’s combined ratio and are an indicator of the quality of the business, he continued.
Schuh then drilled down into the unit’s P&C Analytics function, which uses the clients’ data in combination with data available in the market—or third-party, real-time data—to help analyze, for example, an underperforming portfolio. “It requires a joint project in analytics to assess how to improve the quality of the portfolio, which for some clients has led to lower loss ratios going forward,” he said.
“Another example would be analysis for a client who wants to grow into a new market where they were not present. Even the largest insurance companies are not present in every single market,” he explained. “We help with the assessment of the market potential, the competitive landscape, what you could reasonably expect to do in that market or what period of time, and then how concretely do you do it. What tools and products will you need,” he said.
Other clients may want analysis to better understand the risk around a certain segment, specially if it’s “a reasonably risky class of business,” Schuh noted. “We can do a bit of an assessment to basically have a second opinion on how to deal with that part of the market in their underwriting strategy.”
While insurers can get analytics help and insights from a lot of players in the market, such as insurtech companies and consultants, it makes sense to work with a reinsurance company, because “you are talking with somebody who speaks your language. It’s basically two insurers trying to deal with an insurance proposition.”
“Of course, as a reinsurer, we want to grow our reinsurance relationship with our clients, so in addition to the analysis, Swiss Re also can take on some of the risks,” he continued.
“If a client is offering a new product, or entering with an existing product into a new market, ex ante, nobody knows for sure what’s going to happen. We are in the probabilistic world, right?”
As a result, Swiss Re is there also to carry part of the risk with the client. “Typically, only a reinsurance or insurance company can share the risk.”
Sometimes clients want an analytics piece of work, and later will decide they like the analytics work so much that they would “like to operationalize that now within their own underwriting environment,” added Schuh.
He cited another example of a client that used Swiss Re’s forward-looking model for liability underwriting and decided to use Swiss Re’s tool to calibrate their own tool. “Basically what started as a collaboration based around the tool became an analytics use-case.”
Although Swiss Re partners with insurtech firms in certain areas, Schuh said, a big part of the division’s work not only involves detailed data analytics but also requires development of business insight by a trusted risk partner. “When we work with our clients on a proposition like this, it requires a lot of trust because they want to solve real business problems, develop real strategies that are often unique to a company. It requires trust to do that with somebody who’s not inside your own four walls.”
Schuh emphasized that these are insurance conversations rather than tech conversations. Further, he added, with Swiss Re’s broad market viewpoint, the company is able to offer valuable benchmarking insights—in other words, what can be expected from certain markets and lines.
“Some clients are buyers of risk management reinsurance solutions. Others are more transactional, and others are more into [tech- and data-enabled growth and profit] solutions. And then there are the big companies that do all three in different markets. We believe we have to be able to offer the full range of services and differentiate ourselves as a reinsurer.”
In a field like this, he affirmed, a reinsurer’s competition is not just other reinsurers. “It’s also consulting companies, specialized analytics companies and so on.”
While some clients prefer analytics acumen from a third party and work on a project basis, others prefer to work with an insurer or reinsurer who understands their specialist requirements and has a wide view of the market, Schuh said.