Modernize Treaty Risk Analytics with Moody’s RMS TreatyIQ

The 2023 1/1 property reinsurance renewals were the toughest and most prolonged for many years, with much of the negotiations pushed into the last couple of weeks.

Many reinsurers adopted firmer positions on peril coverages and price across the board, evidenced by 37 percent rate increases according to Howden, with reduced market capital, concerns about creeping catastrophe concentrations, and the increasing cost of retrocession among the drivers of the caution.  

This renewal season required effective risk analytics, which proves to be a real differentiator in this and any renewal season. Reinsurance underwriters that had the flexibility to ask 'what-if' questions concerning their portfolios or programs were able to capitalize on the market dynamics.

They could engage in more advanced risk selection to take on risks that aligned with their growth strategy and risk tolerance guidelines, and closely monitor their portfolio as the renewals went down to the wire to maximize capacity usage.

The reality is that most reinsurers are challenged with executing a selective underwriting strategy based more directly on the cedant’s portfolio of risk.

Many are hamstrung with the same costly and slow patchwork of teams and tools supporting risk analysis for underwriting and portfolio roll-up that they’ve had for years, from catastrophe models and exposure management to contract management and rating and pricing systems, and therefore struggle to scale their processes to meet this renewed analytical rigor.  

This underinvestment in risk operations has left some property reinsurance underwriters feeling like they turned up to the rates ‘gold rush’ with a rusty bucket and a rubber shovel.

Introducing TreatyIQ: A New Integrated Treaty Management Solution

In today's fast-paced market, the speed and scale of the tools used by a reinsurer can make a significant impact on their ability to write new business. Companies that have invested in automation and streamlined their submission workflows to quickly assess the independent risk-reward profile of each new deal and its potential impact on the portfolio, have a competitive advantage over those still using existing systems.

We are pleased to announce the launch of Moody's RMS TreatyIQ™ on the Moody’s RMS® Intelligent Risk Platform™, designed to help property reinsurers and brokers drive superior performance through advanced treaty programs and portfolio analytics. 

Enhance Risk Selection with Leading Financial Modeling 

The TreatyIQ application provides reinsurance underwriters with greater insight into the risk of incoming deals on their portfolios, empowering them to make more discerning risk selection and pricing decisions.

And it does this at speed, leveraging the power and scale of the platform’s cloud-native architecture that has increased modeling speeds by over 36x as compared to on-premises systems, to enable near real-time portfolio monitoring for up-to-date views of risk.

TreatyIQ also allows users to create and analyze complex treaty and portfolio structures without the need for manual workarounds or calculations, all supported by an advanced financial model and contract language framework.

This includes the generation of fine-grain insights on regional drivers of risk (see Figure 1 below) and marginal impact at all loss probability levels for every treaty and program. 

Modernize Risk Workflows by Seamlessly Transferring Catastrophe and Exposure Analytics into Treaty Underwriting

Our customers tell us that moving from catastrophe-modeled losses through to treaty underwriting analytics is a slow and complex process, with each separate step sequenced, and involving many manual data transfers.

But with TreatyIQ these analytics can all be combined into one user task, with the platform intelligently orchestrating all the necessary processes. 

A new dynamic and efficient workflow in the application will allow users to set up a treaty program just once, link it to the underlying exposures (see figure 2), and then interrogate the required analytics without having to re-do catastrophe and financial modeling manually, or rely on already stretched teams to apply your standard view of risk.

As an application on the Intelligent Risk Platform, TreatyIQ works alongside other applications, such as Risk Modeler™ and ExposureIQ™, which all share platform engines and a unified data store. Exposure data, model updates, event response data, business hierarchies, and portfolio structures, once established are available to all.

Portfolios can be modeled using the latest model version, and losses are reflected within business structures.

What benefits are there for users collaborating on the suite of Intelligent Risk Platform applications? For example:

• Users of TreatyIQ and Risk Modeler benefit from catastrophe models running automatically as part of their program analysis, ensuring a consistent view of risk is applied to all submissions while reducing the dependency on cat modeling teams. 
• Users of TreatyIQ and ExposureIQ can use the same portfolio hierarchies for portfolio roll-up and run accumulation analyses across their (re)insurance business (see Figure 3), eliminating the need to duplicate data in a separate system in order to get modeled and model-independent insights. 

Improve Portfolio Performance with Flexible and Agile Risk Analysis

What does flexible and agile risk analysis mean for a reinsurer? Speed, accuracy, and responsiveness of risk analytics increase as TreatyIQ asks you what view of risk you want to analyze your program or portfolio with, and it automatically takes care of the underlying mechanics to get you a result.

Agility and competitive advantage come with the ability to test out new views of risk for programs or whole portfolios without causing chaos, especially when married together with the ability to create custom views of risk, which all present a real opportunity to test out new underwriting strategies.

Furthermore, costs are reduced using TreatyIQ as it allows costly manual data processing workflows including modeling to be retired, and as the average cost of processing an individual quote comes down, the cost of rolling up a portfolio reduces significantly.

Overall, applications such as TreatyIQ are helping reinsurance underwriters to focus on delivering on their client and stakeholder needs through flexible and agile risk analysis and pricing without the manual overhead, ensuring any additional underwriting is profitable and sustainable.

These factors emerge as real business differentiators in a market that needs skillful navigation to succeed.

Find out more about TreatyIQ.