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8 Reasons Paper is the Wrong Solution for Reinsurance Treaty Management

July 27, 2021 / Reinsurance Treaty

Reinsurance_Treaty_Management

For over 100 years, paper treaties have been the backbone of the life reinsurance industry. Paper has been reliable and consistent, but it’s becoming a source of friction as the industry embraces more digital platforms and remote interactions. To enhance efficiency, support collaboration, and ensure data quality, it may be the right time to retire our trusted paper and explore a new approach. 

Here are eight reasons why paper treaties are the wrong tool for treaty management in our digitally focused insurance world: 

  1. Access – Treaty volumes for North American insurers can run into the high hundreds – sometimes thousands. Treaties are often stored in dedicated rooms with row after row of filing cabinets. This makes it difficult and time-consuming to readily access treaty information, especially when treaties contain multiple addenda. With the pandemic introducing remote working, treaties stored in the office were literally inaccessible. 
  2. Data Quality – At TAI, we understand the importance of data quality and why it’s a priority across the industry. Swiss Re’s Ian Haycock (Chief Data Officer) recently said, “A lot of companies have data quality problems – people are not sure if what they’re looking at is right, and they need to reconcile it to something else, which is creating inefficiencies.” Data quality can suffer when relying on paper treaties and often, insurers don’t have the original treaty and instead use photocopies. Over time, this can create issues if the photocopy quality degrades, making the treaty difficult to read and interpret. This often requires the cedant to reach out to their reinsurance partner for clarification, thus increasing time and room for error. 
  3. AnalysisPaper-based treaties and PDFs make it difficult to use treaty data for downstream analysis or test the accuracy of the treaty setup within a reinsurance administration system. Incorrectly set up treaties lead to financial risk, including the underor over-payment of premiums to your reinsurance partners. They can make for some challenging – and avoidable – conversations with your CRO and Reinsurance partners.
  1. ComparisonNorth American treaties can consist of over 100 unique treaty terms. To compare treaties, each document needs to be manually input into a spreadsheet or digital document to review the terms one by one. Treaty comparison is especially prevalent in European markets using annually renewable treaties in which large volumes of treaties are renewed each year. The current paper-based, flat-file approach makes this exercise cumbersome, slow, and error-prone. 
  1. SearchesPaper treaties are notoriously difficult to search efficiently for the most common requests: What is the rate increase, change in ownership, and downgrade or recapture provisions? What are the reinsurer’s claims and reporting requirements? What are the termination and re-pricing features required for IFRS17 reporting? Most recently, it’s become important in the UK to know which treaties contain LIBOR clauses. Such exercises often require a team of analysts to trawl manually through the treaties one by one and search and painstakingly input the required terms into a separate document. It’s no small task to complete on a regular basis. 
  1. Notes and AddendaIt’s common practice to add notes and addenda to existing treaties to reflect new products, enhancements, or extensions to existing arrangements. There isn’t a standard format for these notes and addenda. They can take the form of handwritten notes, emails, PDFs, and even photocopies. Using paper as the source of truth makes it difficult to manage, search, and ensure these changes are correctly set up in reinsurance systems.   
  2. Exporting Data As our industry becomes more digitally focused, there is increased demand to connect all administration systems to third-party applications to leverage the data. Paper and PDF treaties make for a cumbersome manual process to export key treaty terms. 
  1. Treaty Management and ReAdmin Systems A reinsurance administration system, whether it is TAI software, spreadsheets, or an Access database, has to be set up to accurately reflect new or amended treaties. For most of the industry, treaties are passed to the IT department for scheduling and manual input into the ReAdmin solution. This takes time, so it competes with higher priorities on the to-do list. The process isprone to errors because IT specialists are left processing complex reinsurance documents. It also requires review and approval by the reinsurance administration team, leading to further delays and inefficiencies. 

Thankfully, there’s a better way...  

Our new treaty digitization and management software, TAI Treaty, is revolutionizing how insurers and reinsurers digitize, store, manage, and utilize treaty data, ultimately removing the frictions caused by paper in treaty management. This platform is the first of its kind, leveraging a breakthrough data extraction technology that uses machine learning to turn your documents into data. Use the TAI Treaty to build a digital treaty library, read and interpret your treaties with ease, access key information via search capabilities, and simplify treaty compliance. 

If you’d like to move past paper and see the TAI Treaty in action, reach out for a demo. 

Written by
Andy Hazell