The reinsurance industry relies on processing accurate treaty data. Yet, in many cases, treaty information is misfiled, misunderstood, or even missing. Which is a huge risk because if your organization is processing erroneous data, it can lead to large financial adjustments.
Reviewing treaties allows you to validate that reinsurance is being processed accurately and identify errors that could be causing financial issues. So when is it the right time to conduct a treaty review? Like many things in life, there is never a 'right' time. It really depends on a reinsurance company's current state, business strategy, operations and processes to name a few.
Based on our experience, we've identified the most common scenarios reinsurance companies approach us to conduct treaty reviews below.
Before we get started, let’s cover the basics.
What is a treaty review?
It is a comprehensive review and assessment of reinsurance treaties in a specified block of business. The goal is to ensure reinsurance is being administered properly by checking data integrity, compliance and accuracy of premium calculations. If any errors or inconsistencies are found, they can be corrected for accurate processing going forward.
What does our treaty review process include?
Phase one involves building a treaty summary that outlines all the parameters in the reinsurance treaty. The next phase includes a series of tests that identify potential treaty, systems data, and administration inconsistencies. The treaty summary is an essential component of our reviews as it is used as the basis for testing.
6 Common Scenarios That Trigger Treaty Reviews
1. Upon acquiring a new block of business
Reviewing treaties upon acquiring a new block of business helps organizations perform due diligence and gets their teams familiar with the new data. Knowing that the new block of business under your managemet is accurate reduces administration risk and oversight that could otherwise lead to potential financial impact.
Download this fact sheet to discover
6 small errors that caused big financial impact
2. Preparing to acquire a new block of business
Before acquiring a new block of business, reinsurance companies may want to review treaties for their current blocks of business. Doing so gives them confidence that their ‘old’ blocks of businesses are operating error free so that they can focus attention on the new one(s).
3. Converting or upgrading reinsurance systems
This is a situation we commonly come across when working with TAI users. If organizations are upgrading versions or moving from Mainframe to .NET, conducting a treaty review can reduce the risk of data mapping errors or converting ‘bad’ data.
4. Preparing for a reinsurance audit
Whether companies are being audited or are conducting an internal audit, reviews provide a comprehensive understanding of all treaties across the specified block of business. Ultimately making the audit process more seamless and prevent ‘surprise’ errors from being found.
5. Implementing quality controls and knowledge transfer
In the reinsurance industry, treaty management and maintenance can be very tribal, in the sense that knowledge is passed down from one team member to another. If new team members have questions on treaty set up or processing, their resources are limited to team members who have previously worked on it. But what happens if these team members leave?
Producing internal documentation (like the treaty summary I mentioned above) that accurately outlines how a treaty should be administered is a great quality control initiative. It gives everyone on the team an up-to-date view on a block of business and significantly reduces the risk of relying on one person to have all the information on processing a treaty. Ultimately allowing your team to better manage risk.
6. Experiencing financial fluctuations
If financial discrepancies are reoccurring over a period of time, inaccurate treaty data could be the cause. Treaty reviews allow companies to identify the source of error, gain full insight into their current financial landscape and understand drivers to ensure accurate and efficient processing in the future.
What to consider when conducting a treaty review?
Time and resources. Reviewing your entire block of reinsurance business requires a lot of both. It can often be an overwhelming effort because of how time-consuming it is. Not to mention if reinsurance expertise is limited on your team, determining the accuracy of reinsurance administration and systems data overtime can be a challenge. If you can relate to any of the scenarios above, consider using our treaty review services to review your block of business.
Wondering what happens when treaty errors are missed?
Download this fact sheet to discover 6 small treaty errors caused major financial impact.