A Managing General Underwriter Reinsurance Contract Administration and Management System
Business Problem:
A national Managing General Underwriter (MGU) underwrote specialty risk on behalf of re-insurers who were organized into pools that specialized in a particular risk type (e.g., treaty, facultative).
The MGU was running a COBOL application on WANG equipment that was no longer supported. System support was very expensive and did not meet the changing business needs. Contracts with the ceding companies were often complex and required manual system work-a-rounds. Commission splits and risk-sharing splits could not be processed by the system. Quarterly and annual bordereaux reports were manually constructed using word processing and spreadsheets. These reports did not tie to computer generated data and did not provide any history for trend analysis. Cash reconciliation was a complex and labor intensive process. Inter/intra pool retrocessions had to be manually managed which led to difficulties in determining exposure for a re-insurer.
The MGU desired an application solution that would resolve the problems indicated above, provide a dynamic contracting process, tie all reporting and financials to auditable data, and create a flexible strategy for ad-hoc reporting.
Solution:
RESolutions Consulting developed a fully object-oriented business application designed for the purpose of managing all aspects of an insurance /reinsurance underwriting management system. System functionality included:
- Customer Definition
- All organizations that are participants in a contract must be defined as a client, source, re-insurer, or member. Once defined, a customer can be included in a contract.
- Contract Management
- All insurance and reinsurance must have a contract. Contracts were created dynamically based on business rules governing the contract type. The contract management facility identifies contract participants and defines their allowances, lines of business, type of coverage provided, effective dates, administration information and underwriting information.
- Claims Processing
- Manages all of the necessary information to apply claims to a specific policy or contract.
- Billing
- Statement billing to the ceding company and re-insurer was automated.
- Reinsurance Pool Management
- Re-insurers were organized into pools. The pools controlled, retrocession assignments, cash distribution (premiums owed) and claims in the case of loses.
- Fees
- Client fees, fronting fees, and management fees are calculated based on premium of the contract and the agreement with the re-insurers.
- Recovery
- Represents the amount that a pool is responsible for paying on behalf of a retrocessionaire and the amount that the pool will be reimbursed when the retrocessionaire pays.
- Cash Management
- Represents the receipt and allocation of cash to the appropriate contracts. Additionally, manages any adjustments, advances, payouts and check processing.
- System and User Maintenance
- Provides facilities for managing system access at the screen/function level, information processing based on user-defined business rules, and creation and maintenance of hierarchies at the carrier/market level.
- Ad-hoc Reporting
- Provides the user with the ability to easily create outside the normal production reporting environment.
- Security
- The system provides highly flexible and user-specific security features allowing for customized system security controls at the application, data, user interface and organizational levels
Return on Investment (ROI):
The following is a partial list of the ROI achieved by the MGU:
- Provided the ability to manage contracts, manage placements, provide administrative and financial support for billing, payments, collections, and reinsurance contract terms and conditions.
- Improved efficiencies resulting in timely account settlement.
- Provided accurate and timely data in reporting detail activity to their customers, and reinsurance.
- Provided a data warehouse capability which supported analysis of the company's book of business in detail or summary for management reporting.
- Supported growth in premiums from $20 million in 1993 to over 150 million in 1999.
