Most insurers have at least begun to migrate their core applications to cloud deployments. It is no longer a question of if an insurer will undertake a cloud migration: It’s a question of when. But, as with all complex technology initiatives, there are a variety of strategies insurers can apply.

Typically known as “R-Types,” understanding the most common cloud migration strategies is crucial for making informed decisions. Only after understanding the options can insurance leaders select the approach that best aligns with an enterprise’s unique goals and requirements.

Strategies for Cloud Migration

While vendors and service providers may vary in how they define each option, here are the R-Types we see most:

• Rehosting (lift and shift) involves moving applications to the cloud without significantly changing their code or architecture. The main benefit of rehosting is speed, as it requires minimal modifications to existing applications and allows them to remain operational during the migration process. It also enables migration at scale — from physical, virtual, or other cloud environments — to the cloud with minimal concerns around compatibility, performance impact, or cutover windows.

Once on the new cloud hosting platform, applications can be optimized or rearchitected to more seamlessly integrate with cloud-native services. It is important to note that rehosted applications are not optimized for cloud performance, nor are they capable of scaling as efficiently as cloud-native applications.

• Replatforming (lift and reshape) involves modifying specific aspects of applications to better leverage cloud services without completely redesigning the application architecture. For instance, applications can be containerized for greater portability or migrated to managed services to reduce operational overhead and maintenance efforts.

With this middle-ground approach, insurers can transition to managed or serverless services, move from virtual machines to containers, and eliminate certain licensing fees. These changes enhance performance, improve scalability, and often result in lower operating costs compared to traditional rehosting.

• Rearchitecting (refactoring) involves rewriting applications from the ground up. This approach takes full advantage of cloud capabilities by leveraging microservices architecture, containerization, serverless computing, auto-scaling, and multi-regional deployments. Typical use cases include legacy mainframe applications; monolith applications; and applications that are difficult to enhance, are difficult to test, or have low test coverage.

Cloud-native applications are highly scalable and resilient, can be updated and maintained, and can leverage the full range of cloud services. However, as the most complex and time-consuming migration strategy, rearchitecting requires significant time and resources. It may also involve changes to application functionality and user experience, which can impact end users and require additional training and support. Various AI-powered services are available to refactor, migrate, and optimize existing applications and migrate them to the target state.

• Repurchasing refers to replacing an existing application with a cloud-based Software-as-a-Service (SaaS) solution or substituting a custom-built application without the need for rearchitecting. This approach reduces the operational overhead of managing infrastructure and helps minimize licensing complexities.

Before moving forward with repurchasing, it is essential to evaluate the application against business needs, particularly around security and compliance. Once a SaaS solution is selected, teams must undergo necessary training, migrate data and artifacts to the new system, and reconfigure any dependent applications. Typically, the SaaS vendor provides support for these transition activities.

When comparing the benefits and drawbacks of cloud migration strategies, insurers need to consider factors such as the complexity of their applications, the desired level of cloud optimization, the availability of skills and resources, as well as time and budget constraints.

Rehosting is, at best, the first step on an insurer’s cloud migration journey. The other three strategies are further along the path to cloud maturity. But for some organizations, it may be best to think of these options as a continuum, rather than discrete options to select from.

Replatforming: The Entry Point to Rearchitecting

Successful migrations follow a strategic approach based on incremental improvement. Often, that means leveraging replatforming as an intermediate step between rehosting and rearchitecting. This allows insurers to realize many of the cloud’s benefits without immediately taking on the complexity associated with rearchitecting. By replatforming mission-critical applications first, insurers can stabilize and then modernize them incrementally without introducing undue risk.

By adopting cloud-native services and modernizing parts of their applications in phases, insurers can gain valuable experience and knowledge about cloud technologies. This experience can inform future decisions about which applications to rearchitect and how to approach the process. A replatforming stage also enables insurers to demonstrate the return on investment of cloud migration on a smaller scale, building support for larger rearchitecting efforts.

Once an insurer has moved into the rearchitecting phase, making applications cloud-native empowers the organization and its systems to be more flexible, modular, and adaptable to changing business needs, emerging technology, implementing GenAI tools to convert to the target state, and new ecosystem partners.

Considering Repurchasing

While repurchasing took a back seat to rearchitecting and replatforming for a few years, there are several factors that might lead an insurer to replace an existing application with a SaaS alternative. Maybe the existing application is too costly to maintain, or perhaps a newly released SaaS solution can meet business needs more effectively.

Repurchasing can be the right call for an insurer when licensing or hosting costs are high, when the enterprise needs to eliminate infrastructure management, or when it would be too expensive to implement necessary compliance and security measures on an existing system.

If an insurer has an urgent need to modernize or scale but lacks the lead time to refactor or rearchitect its existing applications, repurchasing may be the most beneficial choice.

Making Progress on the Cloud Migration Journey

A cloud migration is not a quick and easy project to be completed in one go, and no two insurers will take the same path to reach cloud maturity. Replatforming before rearchitecting is a smart strategy for insurers looking to modernize their applications, while repurchasing enables faster time to value, streamlined operations, and cost efficiency, making it ideal for organizations seeking agility and lower overhead.

By building cloud skills, proving value to stakeholders, and managing risk through phased migrations, insurers can set themselves up for success in their cloud transformation journey. Knowing the available R-Types before embarking on the path to cloud migration can help insurers take the strategic approach that works best for their organization.

Want to learn more about assessing your preparedness for cloud migration? Download “Cloud Transformation in Insurance.”