4 Reasons for Rolling-Up Reinsurance Portfolios in Real Time

It used to be that reinsurance portfolio roll-ups—combining the estimated probabilistic CAT losses from all the reinsurance contracts you write into one global portfolio displaying your business’s overall expected loss and exceedance probability curve—were done annually because of the time and resources needed. But this traditional rolling up for the once-a-year snapshot of a business appears to be waning. At AIR Envision Europe 2017, we polled the room and found that only 4% of attendees are still rolling up on a yearly basis—65% are rolling up their global portfolios on a quarterly basis, and the remainder are rolling up even more often than that!

This raises the question, why are 31% of AIR clients now taking the trouble to roll up so frequently? In this post, let’s explore several of the reasons many executives are opting to shift their reinsurance companies to roll up not only more frequently, but in real time.

1) More Agility in Decision-Making

As an underwriter, you may be faced with a lot of deals to review at any given time—especially during renewals. One of the advantages of real-time analytics is having the ability to respond faster to your broker than your competitors and pick up the best deals before they can. Real-time analytics isn’t just about responding quickly, though—it’s about responding quickly because you are confident in your ability to assume a given risk, i.e., you know exactly what the marginal impact will be, you know aggregate limits are being adhered to, and you know what remains in your Solvency II reserves. Sometimes, the best decision for a given deal is to pass, and so real-time marginal metrics on top of an up-to-date rolled-up portfolio can help you get to “no” faster, enabling you to move more quickly through evaluating all the deals hitting your desk.

Learn about real-time portfolio analytics in Analyze Re.

2) See All the Angles in Your Loss Data

Being more agile in your decision-making often rests with the ability to view both your present and possible future portfolios through multiple perspectives. Once you have catastrophe modeling loss output, real-time roll-up enables you to not only see cuts of your entire portfolio across various regions, perils, and lines of business during a snapshot in time, but also across various “what-if” scenarios. As real-time effectively connects the portfolio roll-up with pricing decisions, you can quickly test a slew of assumptions—slicing and dicing a handful of layer combinations to include, or making the micro changes to the individual layer and seeing how that effects your global exceedance probability (EP) curve. Real-time portfolio roll-up metrics also give you the option to not just view a few metrics for a given what-if scenario, but instead, you can dig in around any point on the EP curve and flip between different metrics such as Value at Risk (VaR) or Tail Value at Risk (TVaR), instantly.

3) Gaining Visibility Across Global Business Units

As an executive working cross-functionally across departments—and often also across different global business units—do you understand where your Chief Risk Officer across the pond stands? While a one-time or quarterly roll-up of your region’s portfolio is useful for end-of-year reporting purposes, what you have is a snapshot in time, which will usually lag behind where the business stands today. Real-time roll-ups, on the other hand, can bring you up to speed on where things are now, allowing you to move from static Excel reports to viewing interactive dashboards that enable you to make strategic decisions and update your business plan with the most up-to-date information available.

4) Change Underwriting Guidelines More Frequently

Just as the rise of agile software development has given way to the ability to iterate and push code more frequently, so too do real-time roll-ups enable the chief underwriting officer to make changes to underwriting guidelines faster, enabling teams to execute on a strategic vision much sooner than previously possible. Today’s competitive landscape, combined with exposure growth in developing regions of the world, requires more flexibility in being able to shift underwriting guidelines before the plan you’ve set for the year becomes obsolete.

Are Real-Time Portfolio Roll-Ups the New Normal?

The ability to see all the angles in your loss data, having more agility in decision-making (both at the point of underwriting and in iterating on underwriting guidelines more frequently), and gaining visibility across business units are just some of the ways real-time portfolio roll ups are helping reinsurers gain competitive advantages in today’s challenging market. Will real-time portfolio roll-ups become the new normal among reinsurers? In due time, the answer appears to be yes. But, perhaps the real question is, do you really want to wait to find out?

How does your organization feel about portfolio roll-ups? Chat with us by tweeting @analyzere or send a note to info@analyzere.com.

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