As the insurance-linked securities (ILS) sector continues to mature, market participants have an opportunity to collaborate with technology firms to develop tools that can move the industry forward, according to insurance and reinsurance software provider Xuber.
In recent times the ILS market has witnessed some impressive growth, with the acceptance and use of catastrophe bonds, collateralized reinsurance, sidecars and so on gaining traction across the risk transfer landscape.
As the reach and volume of the ILS market has continued to expand, taking an increasing share of the global reinsurance market, industry analysts and executives have noted the potential for further growth, signalling that the ILS sector is at another inflection point.
“But I think like anything that’s maturing the ILS world is probably coming to the realisation that its volumes are at a stage where spread-sheets and basic workflow systems aren’t going to hack it for much longer,” said Xuber’s Business Development Director, Richard Clark.
It’s an interesting and valid point, and highlights an opportunity for the ILS sector to work with specialist risk transfer software and technology providers to establish advanced systems and tools that are able to grow alongside the market.
Serving to avoid a situation that Clark says can be seen with some of the longstanding, traditional insurers and reinsurers that have vast amounts of data on ancient databases, which “promotes a sort of make do and mend attitude,” adds Clark.
Instead then, before it’s perhaps too late and the ILS market further expands its volume and scope and implementation of new systems, or support of old ones, becomes more costly and time-consuming, the ILS landscape would greatly benefit from a collaborative effort with tech firms to ensure the industry is moving forward, and doing things the right way.
“There definitely is scope, I think it’s (the ILS market) crying out for the thing that’s always the most difficult to achieve, which is a collaboration between competitors for the new industry to kind of get together and say, actually we are willing to sit down and collectively work with a technology provider to develop something which will move us all forward,” said Clark.
In theory this would clearly prove hugely beneficial to ILS market players and technological providers looking to better serve the ILS sector, like Xuber. But Clark highlights that there are some inherent issues with this collaborative, ILS industry wide approach, that would need consideration.
“You know we need to work out how they still maintain their competitive edge, and there are some thing’s where they need to be able to be different, otherwise you end up with a little bit of what you’ve got in the London market, where apart from a different sign on the door, and a different financial strength, you’ve got such a homogenised world,” advised Clark.
The utilisation of advanced technology capabilities in the ILS market and also the wider risk transfer world is vital in creating a more efficient risk transfer process, something underlined earlier this year by Hamilton Insurance Group’s Chief Executive Officer (CEO), Brian Duperreault.
Clark continued to stress that now is as good a time as ever for tech and ILS market collaboration; “If you look at the ILS world, that product should be cloud based. It shouldn’t be the old stuff that everybody else is struggling with. They’ve got the ability to be fleet of foot and take something that is right at the latest edge.”
The unique thing about Xuber’s insurance and reinsurance software, notes Clark, is that it can “properly address the needs of Bermuda, U.S. specialty, U.S. submitted business, the London market, and reinsurance in one platform.” Meaning that aggregation, exposures and the entire project overview and understanding is all in one database.
Something that is likely hugely valuable in the current market environment, as the need for a global platform becomes ever more essential as firms seek to become a more meaningful market player.
Currently, however, the type of software/solution Xuber provides for the insurance and reinsurance industry isn’t yet available for the ILS world, further highlighting a need and opportunity for a global collaborative effort.
And while Xuber hasn’t yet got anything specific for the ILS market, “what we’ve done is begun to factor it into, if I’m honest, more of our road map,” advised Clark. Adding; “And getting ILS on the agenda, how can we develop what we’ve got to better serve the ILS market. We’ve been to Bermuda twice in the last 12 months and have started to see that as a very key market for us.”
With financial technology, or fintech as it’s known, a major trend right now in global banking, insurance and technology circles, the drive to increase efficiency and effectiveness of financial industries, while leveraging modern technology practices is popping up everywhere.
Being a still relatively young industry, focused on efficiency and bringing new strategies to an established market, the ILS community would do well to engage with technology firms. It could give ILS another boost to become an even more meaningful complement to the traditional re/insurance business model.