The critical role of data quality in proportional treaty pricing

As reinsurance markets continue to harden both globally and across South Africa, reinsurers are demanding deeper transparency, stronger justification for pricing assumptions, and credible data that stands up to scrutiny. The result is a renewed focus on how proportional treaties are priced - and why the quality of information that cedents provide has become a defining factor in pricing outcomes.

At RSIS, working across multiple portfolios, we see a consistent pattern: insurers who invest in clean, structured and well-explained data secure more favourable terms, greater reinsurer confidence, and more sustainable long-term partnerships. In today's environment, quality data has become a competitive advantage.

Understanding the purpose of treaty pricing

Proportional treaty pricing aims to determine whether a portfolio is acceptable to reinsurers and whether the risk-adequate price will ensure sustained profitability for all parties. Because the reinsurer receives and pays the same proportion of premiums and claims, profitability hinges on understanding:

• The quality of the underlying business
• The underwriting strategy behind it
• The volatility of the portfolio
• Whether a risk-adequate price can be achieved

Pricing also seeks to determine the maximum reinsurance commission that appropriately reimburses the cedent for its acquisition costs. Underwriting philosophy, portfolio structure and loss experience all influence this calculation and, ultimately, reinsurer appetite.

In a tightening market, transparent justification matters more than ever. Reinsurers now expect data-driven explanations for shifts in exposure, loss trends, or underwriting approach.

Why high-quality data determines pricing success

Reinsurers' capital has become increasingly selective. Climate-related volatility, inflationary claims environments and higher cost of capital have all placed pressure on proportional treaties.

Against this backdrop, data quality is no longer a technical requirement - it is a strategic differentiator.

Good data enables reinsurers to:

• Understand portfolio composition and its evolution
• Assess whether projected premiums are realistic
• Benchmark rate adequacy
• Model accumulation and catastrophe exposure
• Identify underwriting discipline and governance maturity
• Evaluate long-term trends, not just the latest results

Most importantly, it gives reinsurers confidence that the cedent understands its own business. When data is inconsistent, incomplete or unexplained, reinsurers are forced to load uncertainty into the price - a disadvantage avoidable with better preparation.

Key data sources that strengthen the pricing narrative

Reinsurers consider a wide range of inputs. Cedents who package this information clearly and consistently benefit from smoother negotiations and stronger reinsurer buy-in.

1. Strategic documentation

This includes business cases or management reports detailing:

• Underwriting team experience and changes
• Market conditions and macroeconomic influences
• Portfolio trends and growth strategies
• Renewal objectives (changes in limits, coverage, structure, etc.)

Providing this narrative aligns the quantitative data with qualitative context - a critical element in today's market.

2. Historic and projected premiums

Premium projections are more than numbers; they reveal:

• Growth or contraction trends
• Product adjustments or new lines
• Shifts in distribution strategy
• Market factors influencing rate adequacy

Large deviations between estimated and actual premiums must be explained. Unexplained volatility in premiums raises concerns about planning discipline and forecasts.

3. Risk profiles

Risk profiles offer a granular look at the composition of the book. Reinsurers use them to assess whether:

• Sum insured bands align with underwriting guidelines
• Premium rates make sense for the underlying class
• Aggregate totals align with EPI figures
• Treaty capacity is effectively utilised
• Large risks exceed treaty limits (and should be facultatively placed)

Consistency across risk profiles, CRESTA data and aggregated exposure tables is essential.

4. Treaty statistics

For proportional treaties, reinsurers rely heavily on underwriting year or clean-cut statistics. Robust data allows them to:

• Understand development patterns
• Assess the credibility of loss ratios
• Reconcile quarterly accounts with treaty-year aggregates
• Confirm the accuracy of commission and profit commission calculations

Inflated or inconsistent historical results - even if unintentional - quickly erode reinsurer confidence.

5. Large loss and catastrophe information

A credible large loss list includes:

• Validated dates of loss
• Correct allocation to underwriting years
• Confirmation that loss amounts fall within treaty scope
• Identification of facultative components

Reinsurers also expect commentary explaining significant outliers, outstanding recoveries, and claim closure efforts.

Additional data that provides a competitive edge

Beyond the fundamentals, insurers can further strengthen their submissions with:

Treaty features and underwriting narrative

A clear picture of:

• Classes protected
• Territorial scope
• Retention and capacity
• Underwriting strategy for the upcoming year

Reinsurers increasingly value this forward-looking context.

New business information

Reinsurers want to understand:

• Market dynamics and competitive positioning
• Expected premium volumes and rates
• Exposure estimates
• Experience and credibility of underwriting leadership

Renewal-specific requirements

For renewing treaties, cedents should articulate:

• Current and projected loss ratios
• Plans to improve underwriting or risk selection
• Target premium volumes and strategies to achieve them

This demonstrates strategic control of the portfolio - a key factor for reinsurers.

Data quality as a strategic asset

As reinsurance markets remain disciplined, cedents must elevate the way they prepare and present portfolio data. Those who do will not only secure better pricing but also build long-term trust with capacity providers.

At RSIS, we see data quality as a cornerstone of sustainable reinsurance partnerships. Our role is to help clients strengthen their datasets, articulate the underwriting story behind the numbers, and enter renewals with a strong, credible pricing narrative.

Part II of this series will explore the key components of proportional pricing models and how cedents can proactively influence them.