ILS players look to InsurTech to disrupt the value chain: WTWS


As technology continues to advance and influence industries throughout the world, the risk transfer landscape seemingly has little choice but to embrace and utilise the rise of InsurTech and, according to Willis Towers Watson Securities (WTWS), some insurance-linked securities (ILS) players aren’t shying away from the challenge.

Insurance technology (InsurTech) start-ups continue to launch and seek to disrupt the global insurance and reinsurance markets with new business models that look to improve the efficiency of the risk value chain, via tech such as big data analytics, machine learning, artificial intelligence (AI) or apps, and so on.

In its first-quarter 2017 ILS market report, WTWS highlights that InsurTech has a role to play in the disruption of the ILS space and the broader risk transfer markets, as it moves from an “outcast to the center of Silicon Valley’s focus.”

“Rather than looking at InsurTech in isolation, some in the ILS asset management space are looking at incorporating InsurTech themes as they knit their plans to disrupt these value chains,” says WTWS.

Similarly, explains the firm, service providers, legacy carriers, and InsurTech investors are looking at the ILS space and related services as a viable, and “fertile” place for both the investment and application of InsurTech movements and ideas.

“While some of these new ideas seem divorced from reality, others very well may explode onto the scene,” says WTWS.

Ideas and innovations concerning ILS and InsurTech vary, and in many instances, remain in their infancy. WTWS states that many of the early ideas utilize big data to improve underwriting and claims management, combined with further steps to remove inefficient and unnecessary legacy costs from the re/insurance value chain, for example.

It’s been reported by industry analysts previously that the rise of InsurTech could create demand for, and increase the importance of reinsurance capital to back new business models that seek to disrupt and improve the efficiency of the value chain. And with ILS increasingly expanding its share of the reinsurance market pie and looking to access risk more directly, it’s very possible capital markets capacity has a meaningful role to play.

Furthermore, the capital markets offer a deep and diverse pool of efficient capacity that’s willing and able to support new and innovative ventures, so InsurTech start-ups might be wise to partner with the growing sub-sector of the reinsurance industry as they look to grow.

As with any market disrupter, InsurTech is likely to bring both challenges and opportunities to insurers, reinsurers, and ILS players as it disrupts the market and looks to create a more efficient, streamlined and potentially more profitable insurance risk value chain.

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