Why reinsurance needs to innovate (and quickly)

Ben Rose, co-founder and president, Supercede.

Reinsurance isn’t getting any younger. And without life-extending technologies, it’s on track for early retirement.

Famously face-to-face, our industry is at a time of life where funerals outnumber birthday parties, and nowadays, it seems fairly content to live off its pension. Half-blind, half-deaf, and unable to comprehend its digital surroundings, reinsurance spends most of its time sleeping; and whilst awake, regales everyone who will listen with stories of its glory days.

This fact hasn’t gone unnoticed by customers: I recently saw an InsurTech use the tagline “not three-hundred-years-old” to great effect. After all, a fast-changing world doesn’t need a reinsurance industry with fragile hips and daytime dentures: modern companies want an industry that looks out for them, rather than the other way around. With such limited digital-age mobility, reinsurance feels at risk of falling – and in its fragile state, a fall could put it in a home. 

At the same time, the industry maintains a worryingly optimistic self-assessment of its nowadays limited capabilities. Its passion to be at the forefront of an internet-enabled economy is trumped only by its inadequacy when it comes to leveraging such technologies itself: a brief inspection of any cedent, broker or reinsurer reveals highly-paid, expert practitioners manipulating data manually between spreadsheets and distributing supposedly confidential pdfs via email.

According to the World Bank, nearly three billion people remained offline at the end of 2021: one can’t help wondering whether reinsurance professionals – despite their immense privilege – were included in the count. Our analogue pedigree is doubly disturbing in the context of a digital economy worth fifteen percent of global GDP and growing two and a half times as fast. Meanwhile, our capacity for bread and butter activities like catastrophe reinsurance is slipping away from us, as investors lose faith in our ability to price and protect dependably.

The world as we know it has gone digital, and to its practitioners’ chagrin, reinsurance has not. We cannot obtain reliable data on the simplest things, let alone the cutting edge, and the cost of manual efforts to extract insight is bleeding us to the bone. As economic, cyber and climate-induced perils loom over humankind, we need a data-driven industry with its ducks in row. As things stand, it would be irresponsible to leave our children under the care of this fast-fading grandparent, who can just about feed the ducks and keep track of its slippers. 

This is not to say that tradition should be forgotten or ancestors disrespected. But while reinsurance deserves a graceful passage into old age, rather than a tumble into dementia and incontinence, its foundational pillars cannot survive on credit alone: they must also be regularly refurbished. I am amongst the fiercest advocates for reinsurance to retain its vibrancy and vigour ad infinitum, but extrapolations of the prevailing inertia can only deliver a grim reaper-like prognosis.

Reinsurance needs to innovate, and quickly. To leave it unattended would be criminally neglectful; thus it falls to the new generation of reinsurance professionals to stage an uncomfortable intervention. After all, reinsurance is not human, with a one-way ticket to eventual death: it is a whole, greater than the sum of its parts; whose parts, even more so than hips and knees, are capable of constant reinvention and renewal.  

As with my own ageing relatives, I love reinsurance despite its resistance to change. I just wish that, like the former, it would give modern technology enablers a go. APIs could be to reinsurance firms what hearing aides are to the hard of hearing; automation, their mobility scooters. Our own company, Supercede, is Viagra for ceded re teams, giving them a much needed stairlift to the rising expectations of their reinsurance partners. But without an open mind, the industry will remain its self-perpetuated stereotype: an ignorant and impotent old boys’ club.

How do we de-quagmire our industry from the sticky status quo? Certainly not by building things in-house. As lawyers who represent themselves have fools for clients, reinsurance firms who believe themselves software houses must prepare for judgements to go against them. Thankfully, the global-by-default nature of reinsurance protects us from contributing too often to a smorgasbord of ill-orchestrated innovation blueprints witnessed at the regional level. Nevertheless, it has left something of a void in its place.

Yes, individual companies have toiled to render their own legacy systems less fuddy-duddy, but this has left the commons tragically unattended. Only a blockchain experiment has succeeded in permeating the digital void between reinsurance companies and their customers; in the process, alienating the broker community and converting millions of euros into a solution that never found its problem. The smart money is adopting Supercede early – but for those late to the digital reinsurance party, old age is only getting worse.

That notwithstanding, reinsurance is only partly to blame for its historically limited adoption of digital technologies. Vendors have tended to sidestep the complex but necessary accommodations required to service this elderly industry with empathy; neglecting the wisdom, experience and capital that it can bring to the table. That’s why at Supercede, we take a different approach: we serve reinsurance professionals and reinsurance professionals only, with commensurate care and attention.

Reinsurance may be stubborn, but digital technology is not beyond its faculties: something we prove with every Supercede client implementation. With thoughtfully designed digital tools, there’s nothing stopping reinsurance practitioners from doing their best work for generations to come. If we act now, and quickly, we can turn the conversation about this industry’s old age, to one about its digital age.