Pro Global (“Pro”), the leading trusted advisor for the specialist insurance sector, announces today its ambition to support London market and global re/insurers in repatriating over US$1 billion in unused loss fund reserves, in line with market-wide claims and reserving digitisation and efficiency drives.
In 2022 working across with two global re/insurers alone, Pro validated US$19 million in Loss Funds as current and correct, but released over US$25 million in redundant reserves in the form of capital back to re/insurers. However, achieving better Loss Fund management is a market-wide challenge; Pro estimates over US$1 billion in reserves is sitting dormant in Loss Funds, despite all claims being paid in full, resulting in misleading data and loss ratios, and higher financial exposure.
The accuracy of Loss Fund reserves is critical for the efficient and competitive functioning of the market, and with new market-wide standards and initiatives such as Lloyd’s Faster Claims Payments to help digitise and speed up claims payments, this issue is also firmly under the regulatory spotlight.
Regulators also mandate that Loss Funds must be stocked with sufficient and readily available funds to ensure swift payments – an outcome which is key to offering fair value to policyholders.
Senior Technical Claims Consultant at Pro Global, Chris Doherty, said: “The issue of repatriating redundant Loss Funds at re/insurers is significant; very large volumes of reserves – running into the tens and hundreds of millions in some instances – are currently sitting dormant despite all claims being paid in full. Some Loss Funds are even being written off entirely.
By any standards this is an inefficient use of capital. Loss Funds are a vital element of insurance, and repatriating redundant reserves is an important element to the resilience of re/insurer balance sheets, particularly in the current economic climate. However, we hear that daily workloads at re/insurer claims teams are often overstretched, and recovering such funds often falls by the wayside.
With the spotlight on cost savings and efficiency, as well as regulatory compliance, there is clearly strong recognition that the speed of claims payments and ensuing Loss Fund repatriation work must be improved, and we are issuing a call to action to the global re/insurance market to offer our support to help address this US$1 billion issue in 2023 and beyond.”