Market has over $1 billion in unused loss fund reserves, despite claims being paid in full
Pro Global is calling for re/insurers to tackle the issue of loss fund repatriation amid increased scrutiny over financial and operational efficiency, and regulatory focus on accurate reserving, describing it as an an ‘inefficient use of capital’.
The company estimates over $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.
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.”
The accuracy of Loss Fund reserves is critical for the efficient and competitive functioning of the market, with initiatives such as Lloyd’s Faster Claims Payments to help digitise and speed up claims payments keeping the issue under the regulatory spotlight.