Insurers Seen Lagging On Tech For Reinsurance Administration

NU Online News Service, June 18, 3:51 p.m. EDT

A survey of chief financial officers at U.S. property-casualty insurers has found that 80 percent of them still rely on spreadsheets for reinsurance administration.

The findings were made by Columbia, S.C.-based StoneRiver, which found only 13 percent of respondents were utilizing an automated system.

A system that is entirely automated, Stone River advised, dramatically reduces the likelihood of errors due to manual processes.

StoneRiver said the goal of its survey was to learn industry trends for 2009 and early 2010, to track interests and to discover strategic direction when it comes to reinsurance administration.

Of the carriers that responded, the firm said 53 percent already use a ceding engine and 47 percent have a system that automatically identifies and attaches reinsurance per contract terms.

However, while some companies have a ceding engine, or automation around the identification and calculation of reinsurance, they still manage reinsurer-level balances, billings and cash on spreadsheets, StoneRiver said.

The hottest reinsurance issue cited in the survey is the lack of reinsurance automation, according to StoneRiver.

"This is of interest, considering that every respondent reported that its company has a good sense of the status of reinsurance recoverables. It is possible that the concern comes from not having automation for aggregation in the event of a catastrophe," StoneRiver said.

The firm added that another possible explanation could be that the companies polled feel comfortable with the status of reinsurance recoverables, but face concern from others within their company about the lack of automation.

"Part of sound reinsurance administration includes consistent processes that produce accurate information," commented Gary Sherne, president, Insurance Solutions, StoneRiver. "Automated systems can help ensure that carriers reach their objectives for dealing with clean data."

StoneRiver said the 15 companies in the survey were a cross section of carriers with direct written premium ranging from $1 million to over $1 billion.

In response to the question "how well does your current process allow you to automate your property catastrophe events," 47 percent responded with an Average rating (3 on a scale of 5). Only 13 percent rated themselves a 5 on the 5-point scale.

The complete survey is available for download at www.stoneriver.com.