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Transforming Insurance by Leveraging Capital Markets Expertise


While technology has disrupted almost every major industry over the last 30 years, including financial services, historically, the insurance sub-sector has been slow to change.  Many firms have legacy systems that use proprietary technology unable to cope with modern demands – the onslaught of structured and unstructured data, increasing regulatory scrutiny and snowballing requests from customers – none of which can be addressed due to the high of cost running legacy technology, and slim budgets for innovation.

The costs of doing business in this environment are too high, and without change, firms face the genuine possibility of their operations and growth projections being compromised by legacy systems that can no longer meet the increasing demands of regulators and clients. The situation is reminiscent of the capital markets environment of the last 1990s or early 2000s.

Encouragingly, however, there are signs of innovation becoming more widespread. Advancements in Insurtech and translation of FinTech capabilities to the insurance sector are reducing the market barriers and making it easier than ever before for re/insurers to adopt new technologies and enter new markets.

Nasdaq believes there is tremendous opportunity to leverage capital markets technology principles – high-volume, high-speed messaging, complex data management, robust risk management and oversight, and excellence in fair price discovery and asset transfer – to disrupt the insurance industry in a positive way and accelerate its transformation to an innovative, forward-thinking sector.

In 2018, we launched our ‘New Markets’ initiative, focused on extending our core competencies in market technology (which we provide to 115+ marketplaces in all corners of the globe), data and analytics to disrupt other industries, like insurance, where we already see positive indications of innovation. While we are already supporting trading in insurance-linked securities at the Bermuda Stock Exchange, we have previously established a new market opportunity with Extraordinary Re and have recently acquired ModEx, an innovative risk modelling ecosystem, formalizing our entrance and commitment to the insurance segment.

Opportunities for New Marketplaces:

The combination of technology, institutional investors’ interest in insurance and the growing importance of new classes of risk to the global economy is disrupting the reinsurance marketAlternative capital has already brought change to the property catastrophe reinsurance sector, but structural innovation is needed to meet investor demand for access to other classes of risk. Extraordinary Re, which is powered by Nasdaq’s matching technology, is a new marketplace that allows investors to assume risk in a liquid marketplace for tradeable insurance liabilities. Investors can control the amount and types of risk as well as the timeframe over which that risk is carried. That permits the allocation of capital in a more flexible manner than is currently possible in the insurance industry. Investors can hold shares of a single reinsurance risk at different points in the lifespan of that risk between policy inception and the date when the last claim is settled. As such, the trading market allows risk to be allocated to the most efficient (and lowest cost) capital provider throughout the term of each risk. And all this is made possible by Nasdaq technology.

An Innovative Approach to Catastrophe Risk Modelling: As part of our acquisition of Cinnober Financial Technology AB, we have invested in ModEx, an independent catastrophe risk modelling ecosystem that enables re/insurers and brokers to access a broad array of specialized risk models, hazard data and analytics provided by multiple model vendors in a single, fully-managed platform.  ModEx utilizes the Oasis Loss Modelling Framework and offers a cost-effective way for firms to meet their modelling requirements, improving the overall quality and choice of models and services available to the market. Traditionally, the insurance industry has leveraged two major incumbent vendors, with proprietary technology that has made it difficult for other vendors to make headway and for firms to implement a multi-model strategy. We believe that the ModEx approach is truly unique and one that will help the insurance industry capitalize on technology disruption, rather than being disrupted by it.

We are undoubtedly approaching a pivotal moment in the insurance industry, which is ripe for change. We are excited to drive innovation in this field and truly believe that capital markets technology can play a critical role in the transformation of such an important space.

Follow us on our developments in this space!

Linkedin: Nasdaq Tech

Twitter: @NasdaqTech

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.




This article appears in: News Headlines , Technology



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