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Bermuda:Re+ILS Spring 2016

Spring 2016 20 Bermuda:Re/insurance+ILS also been rapidly establishing new operations to take advantage of the influx of alternative capital into the market,” Russell says. “This combination of market movements has compounded the level of operating model complexity for many re/insurers. The priority has been about getting to market and expanding scale and not necessarily about efficiency of operations, post-merger integration and the standardisation across traditional re/insurance and new third party capital operations.” He notes that, as a result, some organisations have duplication of activity and roles, operations in underwriting and finance are not as simple and scalable as before and many re/insurers are operating with a range of core policy administration systems that are not yet fully integrated post-merger. “Within this context robotic tools can play an important role in driving efficiencies across re/insurance operations in what is expected to be more challenging and margin-focused reinsurance market environment.” There is a range of re/insurance processes that have high potential for automation. In the front-office, these include the movement of risk data which is often a manual effort. In finance functions, operations often require a high level of manual data entry and high-volume reconciliations. Internal, external and regulatory reporting activities can also often demand significant manual effort to gather and consolidate information from various systems, reports and data sources. “Handling the peaks in volume demand during the key renewal seasons is another major operational challenge for all re/insurers. Underwriting administration and finance resources are placed under significant pressure to set up, review, bind and process all their treaty renewals over a short period,” Russell says. “Robotic process automation is a potential solution to this annual challenge by providing a mechanism to virtually increase headcount, and give the operations extra processing capacity to cope with the renewal demand with little additional costs.” Robotic tools can also sometimes play a role in data migration between systems as part of post-merger integration activities or to support interim process during periods when companies are going through the postmerger development of strategic systems. Russell adds: “The only real alternative approach to driving substantial emails and documents, extracting and loading risk data, sending emails to underwriters and actuaries, processing bordereaux statements, handling claims processing and supporting finance reconciliations,” Russell says. The benefits of robotic automation The advantages of using this new generation of software are rapidly becoming apparent. Early adopters of these types of software robotic tools are declaring a wide range of benefits from their pilots and proofof concept exercises. “Many re/insurance operations will have highly skilled and valuable resources in finance and actuarial functions working on low value data entry and robotic tools present an opportunity to refocus these key resources on to critical analysis and unlock improved scale and accuracy benefits,” says Maiato. Unlocking the value of these key resources is a major advantage conferred by automation, notes Russell, with data processing cost reductions being a welcome collateral benefit. There are other advantages over the traditional offshore model: robotics can run 24/7, processes can be defined and monitored with a full audit trail, and the challenges of attrition and retraining associated with using offshore operations can be avoided. “The cost savings are substantial but it is the breadth of potential benefits to improve overall efficiency, accuracy and quality that is making the use of robotic tools most attractive to re/insurance companies,” Russell says. “For repetitive tasks, the reduction in error rates is estimated to be 25 to 30 percent, leading to substantial quality and service improvement.” Maiato notes that repetitive, high-volume tasks can be processed by software robots with speed that would not be achievable by human analysts and administration resources. “Finally, the deployment of these tools is very different from traditional IT or system implementations. Robotic tools work directly with existing user interfaces and they can be trained by existing business users leading to rapid deployment and significantly lower implementation costs compared with those of more traditional IT projects.” Potential to improve the insurance industry A combination of factors has resulted in a marked increase in the operating model complexity for the specialty and reinsurance sector in Bermuda. Russell says this change in the market highlights the need for companies to find more efficiencies. “We have seen a high-level of merger and acquisition (M&A) activity over the last couple of years as re/insurers seek scale and diversification of their product lines. At the same time, many Bermuda players have


Bermuda:Re+ILS Spring 2016
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