Expert interview: Reinsurance in the DACH Market

For insurers it is essential to have full financial control and flexibility over their entire reinsurance process. Appropriate reinsurance solutions make this possible. One of the leading systems worldwide is Sapiens Reinsurance Master (SRM). Our Sales Director DACH, Simon Dufour and Martin Greenberg, Head of Reinsurance Business Practice at Sapiens, talk about the added value reinsurance systems provide and why they are so important for global insurers and reinsurers.

Martin, can you please describe your background and your current role?

For many years I was involved in IT development and management, most of these years in the insurance industry, on the customer side. In addition to my IT career, I was also the CEO of a company within the Israel Phoenix Group for 3 years. Then I moved to the vendor side, developing and managing P&C and Reinsurance systems; I’ve been with Sapiens for over 17 years, currently as head of reinsurance business practice and pre-sales at Sapiens for the product ReinsuranceMaster.

Simon:
About myself I can tell that I was professionally born and raised in reinsurance… I spent 21 years with Munich Re, which is the market leader in this field of business, in different operation roles. I decided to move to the IT vendor side in 2019. I’ve been with Sapiens Germany for four months now as a senior sales executive.

What does Sapiens ReinsuranceMaster (SRM) exactly do, what are the value propositions for an insurance company?

Martin:
With SRM the insurance company manages the entire reinsurance value chain. The system stores all reinsurance contracts on a single platform. Once the user sets up all the reinsurance contracts & programs, the system automatically performs the allocation of policy and claim transactions to the appropriate reinsurance contracts, based on the rules set up by the user in the contracts. SRM does the allocation and all the calculations involved – premium, commission and allocation of claims, all this is performed automatically.

We also do all the accounting involved, so we report automatically to all third parties, the reinsurers, and brokers.

I’d say any IT system, especially in the finance area, must have full reporting capabilities. With SRM we have vast online queries, which the user can activate and retrieve information immediately for all purposes.

To sum it up, it’s an end-to-end product managing all the reinsurance contracts, all the calculations, all the accounting, and provides all the information relevant for statistics, management and regulatory reporting.

Simon:
That leads to the following value propositions:

The ability to manage the entire reinsurance program, using many, many functionalities. We can cover each and every insurance product on the market. You can consider it as a tetris game: all the programs are intertwined, which makes it very complicated to manage. And this is exactly what SRM is doing automatically.
Superior accounting support: We support each kind of accounting output, including local and international regulatory reporting standards.
We can support global organizations: SRM supports multi-company, multi-currency and multi-language. That means, a company can manage not only their outward cessions, but also intragroup reinsurance schemes in their market and abroad.
SRM can support inwards and outwards reinsurance e.g., the reinsurance you cede, but also the reinsurance you accept. This means that these can be offered to both insurers and reinsurers. This is very important, because the frontier between insurance and reinsurance is getting blurrier every year.
SRM is configurable and flexible. It’s a product where many, many functionalities come already out of the box and clients can configure them instead of coding them. That’s basically an advantage in terms of implementation at the client ends.
And we also listen to our 20+ clients worldwide! Doing so, we can constantly improve the functionalities of the solution.
And we invest heavily in the technology of SRM, moving to a containerized microservices architecture through a module-based approach

Martin:
Flexibility is so important because, as Simon is saying, reinsurance programs can be very complex, with various contracts benefiting each other. Imagine every year you need to go to IT to change the program. But the reinsurance department wants to be independent and be able to do this by themselves.
Configurability and flexibility are key for ongoing reinsurance business.

Why is it so important for insurers to have a comprehensive reinsurance system in place?

Martin:
First of all, it’s about optimizing the operational activities. The company is insuring themselves against very large risks: They take upon themselves many policies of many lines of business and have to protect themselves against large claims scenarios. These reinsurance contracts protecting significant liabilities cannot be administrated with Excel-like tools, which creates a huge operational risk for management and the organization.

So that’s reason #1: Ensuring accuracy, because once insurers are managing reinsurance via Excel, they are relying on human activities which are prone to error.
Errors can happen and companies must have a system in place to ensure accuracy and prevent errors. It’s also about compliance and risk management; and insurance companies are top thinkers about risk management! It’s important to have automation for reinsurance because you can miss significant claim recovery amounts using manual reinsurance activities.

Also, insurers want to implement authorization and security rules and processes: who’s allowed to enter what type of amount and what is subject to an additional approval. I need a full audit trail in place and be able to review whatever happens. For that I must have an effective system in place to guarantee accuracy and process control.

As an insurer, I want to make sure that everything is streamlined, and works easily. Employees have a defined time window every day to complete all their activities. Once everything is tracked and planned, the system will work, streamlined and in the best way.
So after all it’s about optimizing effectiveness plus efficiency, so that’s one part.

Next, we spoke about the risk of reinsurance: As an insurer, I need to recover claims. I’m paying off claims for large events like wildfire, floods, individual businesses, you name it. And I need to recover the appropriate claim amounts from my reinsurance contracts.
Companies that are calculating and managing recoveries manually or based on Excel sheets, will have “claims leakage”.

There’s a huge risk involved, and the amounts are so large, companies are implementing reinsurance systems as result of encountering significant losses because of inefficient, ineffective claim recoveries.

The third reason is accounting support. There are many monetary – premium, commission, claims – reinsurance transaction amounts; you need to be able to transfer that seamlessly and accurately to accounting. Everything around accounting must be managed accurately, swiftly and automatically. You cannot do this manually. Because at the end of the day, if I’m not managing my accounting correctly, I’ll be losing money.

You said, 20+ customers worldwide are using SRM at the moment. Who are those customers?

Simon:
Well, the customers of SRM are basically located on four out of five continents worldwide. Only Australia is missing. It’s a mix of different kinds of companies: We have multinationals like AIG, CHUBB, Generali Employee Benefits, regional players like ABSA in Africa or MSIG in Germany and we have the local players like the Polish company Warta. So, it’s a very colorful mix of clients.
When you look at the breadth, you can see that one product is able to cover reinsurance business worldwide. That’s because reinsurance in most countries is quite similar. There are differences between markets, but it’s a global type of business.

I think it’s very important to underline that we have clients in the private line insurance business, but also those which are involved in industry or commercial insurance, where the reinsurance programs are especially challenging to administrate.

Which role will SRM play in the DACH market in the future?

Simon:
Hopefully a large one! So far, we have a limited footprint in the DACH region. To change that, we are going to trigger conversations and demos with prospects and deepen our knowledge of the market dynamics. We want the market to get more familiar with our solution and ultimately of course, we would like to see the number of partnerships grow with reinsurers and insurers in the near future.

Martin:
Another topic we didn’t really touch upon during the interview is our Business Analytics capacities.
We are developing specific reports that provide KPIs (key performance indicators) to help managers plan reinsurance for the future.
Instead of telling you what happened in the past, we must provide a report which will tell you what’s likely to happen in the future. That’s proper business intelligence. Managers could make better decisions towards the future.

Simon:
To conclude: Products for reinsurance might seem the same. But one of the big advantages Sapiens has: We have a practice of reinsurance with people really knowing what they’re talking about. We are not only a software provider, but we are also a group of people really knowing what reinsurance is.
And I think this is one of the biggest assets of all.

Learn more about Sapiens Reinsurance