The reinsurance industry is ready to transform into a more efficient and data-driven industry — and participants who fail to realise that will struggle to survive.

That is the view of Kathleen Reardon, chief executive officer of Hamilton Re, who believes that only those who embrace the technology that can improve the way the industry does things will thrive in the future.

Ms Reardon was speaking with The Royal Gazette after returning from the Rendezvous event in Monte Carlo, a get-together for the industry and its service providers.

“Data science is the way of the future and this industry needs to evolve or go bust,” Ms Reardon said.

“I believe the industry is about to transform. Some will embrace it and others will be left behind.”

Reinsurers’ profitability is under pressure from a downward trend in rates, driven by a glut of alternative capital coming into the industry amid relatively low catastrophe occurrences, as well as a prolonged period of low interest rates squeezing returns on investment portfolios.

In Monte Carlo, Ms Reardon said, there seemed to be a growing appreciation that greater use of technology was needed.

There were many discussions about non-industry participants with useful expertise becoming involved to help the transformation happen, she said.

“The principles of the traditional way of underwriting don’t go away, but the question is: ‘How do you supplement that with technology to make better decisions?’” Ms Reardon added.

Underwriters already use data analytics, but Hamilton believes it can set a new standard in this area, helped by the expertise of technology and investment partner Two Sigma.

Ms Reardon and her colleague, Brian Duperreault, CEO of Hamilton Insurance Group, have frequently argued that the effective gathering and analysis of data will allows reinsurers to better evaluate risks. Ms Reardon argues that this will translate into products that are not only relevant to clients’ needs, but also fairly priced.

In an interview with Insurance Day in Monte Carlo, Mr Duperreault said: “In my experience, in the business of underwriting, you select a risk and then you price it. When technology is applied, it is more powerful in the risk selection process and in the understanding of the risk. It allows us to see the risk but without being as clouded.

“Once you apply the technology, the pricing becomes easier to do and, as an underwriter, if you can better understand the risk, you can outperform your competition, so that’s where we’re concentrating our efforts.”