Every major reinsurer is testing AI, but adoption will stay gradual as firms face model risk, regulatory compliance, and reliance on human judgment, AM Best says.
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Interest in artificial intelligence is surging across the reinsurance industry, but the adoption curve will stay gradual as firms wrestle with model risk, regulatory compliance, and the sector's ingrained reliance on human judgment, according to a new report from AM Best.
The rating agency's report, titled Global Reinsurance at an Inflection Point: Can Discipline Survive the Temptation of Record Capital?, notes that every major reinsurer is assessing how to weave AI into operations. None of them are close to a wholesale shift.
"Initial investments have largely focused on efficiency gains and cost reduction opportunities," AM Best's analysts wrote. Those early projects cover "document processing and claims administration to workflow automation and internal knowledge management." The payoff there is clearer, the report says: these are tasks where the output is measurable.
More recently, the focus has broadened. Some firms are testing AI tools for underwriting support and risk analytics – areas where the technology could flag emerging trends or sharpen exposure analysis. But even here, "the potential for AI to augment underwriting processes" has not replaced the core human role, the report says.
Reinsurance underwriting depends on professional relationships, complex judgment calls, and exposure to low-frequency, high-severity events where data is scarce. Those factors limit how fast machine learning models can deliver. The report describes the likely path as incremental rather than transformational.
The risks of faster adoption are also on AM Best's radar: model risk, lack of explainability in AI-generated decisions, and potential shortfalls with regulators that demand transparent logic. Talent shortages, uncertain return on investment, and vendor dependence are other obstacles the industry faces.
Still, AM Best does not hand-wave the long-term potential. "AI increasingly appears poised to become a differentiating factor for organisations that successfully integrate technology into underwriting, claims, and operational processes while maintaining appropriate governance and risk controls," the report concludes.
That is a view shared by analysts who track the sector. The big question is how many firms can clear the hurdles before the technology reshapes competitive dynamics among carriers and reinsurers alike.
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