Importance of Data Risk Selection for Reinsurers 

With modern technology data has become one of the greatest resources for any company.  The insurers and reinsurers who can gain better insights from data can translate them into a better pricing and see significant improvement in underwriting profitability. It is critical for carriers to enhance underwriting capabilities by leveraging multiple data sources to help optimize processes and get the most effective utilization of underwriters.  So how do we utilize these tools in order to enhance underwriting capabilities?  

CAT Exposure Modeling. 

You may be asking what CAT Exposure Modeling is? CAT is short for Catastrophe, it is a computerized system that creates a series of simulated events – such as hailstorms, hurricanes, tornados, floods, etc. to show you the most likely outcome based on historical data and current data on the areas.   This modeling provides insurers and reinsurers perspective on expected losses and can be tuned to provide information on specific events.   In fact, many insurers and reinsurers will use an event review immediately after a bad storm to estimate liabilities before claims are filed. 

Risk Selection by Primary Carrier/Cedant 

Risk selection is driven by a combination of risk characteristics, person characteristics and review of storm/weather hazards.  By improving your risk selection, you should expect a reduction in losses; when losses are lower, the reinsurer can provide better pricing creating a mutually beneficial outcome for all parties. 

Pricing Optimization 

As a reinsurer we must deal with complicated insurer situations.   Historically, many reinsurers utilize guesswork based on previous years which may not consider current and projected exposures.  With the use of accurate models driven by data we are able to base our underwriting processes on the historical and projected expectations.    By using this data to optimize the pricing on individual risks and our portfolio, we can provide more accurate pricing for the exposure which benefits all partners. 

LOB Insights 

Risk selection based on data is part of the reinsurance underwriting process.  It is very important to provide insight into various lines of business and the impact they have on your reinsurance portfolio.  The CAT modeling is tweaked for each line of business providing granular depiction of exposure. Again, with an objective of providing accuracy in projecting losses enabling reinsurance underwriters to price risk appropriately. 

About Mutual Underwriters 

Mutual Underwriters is an insurance administrative services and managing general agency headquartered in Carmel, Indiana.  The company mission is to provide management expertise, product development, underwriting expertise, and strategic advice to small insurance companies, Mid-size insurance carriers, MGAs, and Program administrators.  Our objective is to help these organizations modernize and thrive.