Stable, a technology company that provides an index-based platform for commodity hedging, has launched in Bermuda and established a collateralized insurer class of company to support its insurance work and presumably reinsurance needs.
Stable has been around for a few years and having honed its data science tech platform and tools, creating a methodology for hedging commodity prices risks, focused on the hard to hedge or commodities that previously haven’t been hedged, the company raised funding from fintech and insurance investor specialists and has continued to develop into a risk management and transfer service provider.
Stable had raised $6 million of seed funding from Anthemis, Syngenta Ventures, Baloise and insurance group Ascot Underwriting.
Aiming to enable global food and farming businesses to find a “stable” price for commodities, through risk management, hedging and insurance, Stable has established its insurance platform in Bermuda and calls itself the “first of its kind Insurer to protect global food and farming businesses from volatile commodity prices.”
Stable seeks to address the $5 trillion of untraded or illiquid agricultural commodities that cannot be hedged, the company explained.
It has created an index-based solution to achieve this, covering more than 3,000 commodities in over 70 countries.
Customers can use the Stable platform to find simple solutions to this previously unmitigated risk, so they can hedge against swings in price, demand related volatility and other factors, stabilising the price of these commodities for them.
By matching hedges to their operations, they can mitigate the impacts of price swings. While Stable uses reinsurance capital to underwrite and back all hedging contracts, which we understand are options, entered into on its platform.
Stable selected Bermuda as the domicile of choice for its novel insurance structure and with the help of Appleby Bermuda and Norton Rose Fulbright, Stable has now set up its Collateralised Insurer (called Stable Corporation) and also an issuer of over-the-counter (OTC) commodity derivatives (called Stable Bermuda).
Aon is providing insurance management to the structure, while reinsurance support is provided by A rated reinsurance carriers led by Ascot Bermuda.
Richard Counsell, CEO of Stable Group stated, “We’re delighted to launch Stable’s global risk management platform in Bermuda. The support from the BMA and forward looking reinsurers, together with its plethora of top notch service providers and talent made it a natural choice for Stable.”
Andrew Brooks, CEO of Ascot Group commented, “Stable’s innovative technology enables the platform to tackle a significant problem for a $5trn industry. As a leading reinsurer, Ascot is excited to support this diversifying new line of business, priced with cutting edge technology.”
Choosing a collateralized insurer is particularly interesting, as it may give Stable the ability to bring capital markets funding into its operations, to augment its reinsurance protection and fund its ability to bear more of these commodity price risks.
While commodity prices are not completely uncorrelated with financial markets, when indexed in this way they present a very attractive risk-linked asset class that many of the same investors allocated to insurance-linked securities (ILS) would find of interest.
Stable is in a unique position, as a leading platform helping commodity owners and users hedge volatility in that marketplace. As such, with a collateralized insurer now set up, it could find interesting opportunities to leverage the capital markets as a reinsurance provider to its operations as they grow.
This is the second Bermuda domiciled collateralized insurer launch we’ve written about today, after Marilla Reinsurance Ltd. was set up by Aon on the island.