The many benefits of ceded reinsurance software systems with robust calculation engines—increased productivity, improved accuracy, enhanced profitability, steadfast audit and SOX compliance, improved operational control and flexibility—are well known. However, one important benefit is usually overlooked: automated "what-if" scenarios that take the guesswork out of renewal pricing for reinsurance contracts.
What-if analysis using robust calculation engines has been around since the late 1990s—so what's new? Well, nothing. It does not require automated calculation engines and it can be done manually, if you have an expert on staff with a week or two to spare.
But these days, vendor calculation engines are much more powerful and flexible. Still, only about 5% of American insurance companies have invested in sophisticated ceded reinsurance vendor systems, as most reinsurers continue to rely on Excel spreadsheets and other manual procedures. The rest are using in-house solutions, some with calculation capability relating to ceded reinsurance.
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