IncubEx, the product and service development firm that counts its founder and Chairman as insurance and reinsurance entrepreneur and Brit co-founder Neil Eckert, is in the market raising funds and we’re told that one of the target products the firm is working on is catastrophe risk trading.
IncubEx was launched in 2017 “a financial markets incubator and business development team,” looking to utilise its experience and market relationships across sectors such as global energy, environmental commodities, reinsurance, and related asset classes, the firm said at the time.
Chairman Neil Eckert was not just the founder of well-known insurance and reinsurance group Brit, but was also behind the catastrophe risk derivatives trading ideas of the Insurance Futures Exchange (IFEX), a venture that sought to make catastrophe risk into a tradable asset and was perhaps a little ahead of its time.
With IFEX Eckert looked to create an exchange based platform for trading insurance-linked contracts, such as derivatives or event-linked futures, tied to perils such as U.S. hurricane risks in peak zone regions such as Florida and the Gulf Coast, mainly using an industry loss trigger.
The IFEX was launched as part of the Climate Exchange plc venture Eckert had founded and was the CEO of, a venture which was subsequently sold for £400m.
The IFEX component gained some traction through 2008 and 2009, but failed to gain sufficient activity to become sustainable on a long-term basis, with reasons mooted from the transparency of triggers, to the lack of open capacity auction technology, as well as the fact that timing could have been important and it was just considered too early by many in the reinsurance sector
Now, IncubEx is in the market with a new fundraising, for a targeted capital raise of US $5 million at a pre-money valuation of US $50 million.
Eckert himself is participating in the funding round, as well as a company that he is Executive Chairman of, Aggregated Micro Power Holdings, which already holds a significant interest in IncubEx.
An additional so-called “major strategic investor” is set to inject US $1.65 million into the funding round and will take a board seat of IncubEx as a result.
The fundraising, which is expected to be completed very soon, will boost the valuation of IncubEx significantly, as well as provide working capital as the firm continues to work on its market-focused product developments.
Artemis has been told by a number of sources that IncubEx has been working on a catastrophe risk trading product of some description, with discussions on the types of products that insurance, reinsurance and ILS funds may want to trade having taken place.
We understand that this is still considered early days in the process and do not have details of any impending product launch, but IncubEx has been discussing the potential for an IFEX-style catastrophe risk trading platform or exchange, with industry loss based products one of the items we understand to have been discussed.
IncubEx wouldn’t comment on the rumours when asked.
Timing may be significantly more fortuitous for the launch of a catastrophe risk trading venture now than it was when IFEX stumbled, with the market focused on the efficiency of risk transfer, technology and how it can source and lay-off catastrophe exposures in the most cost-effective manner.
Hence any initiative from IncubEx in the catastrophe risk or derivatives trading space could provide an interesting option for those looking for hedging capacity or to deploy capital into such products, which might be particularly of interest to ILS funds and retrocessionaires, which are becoming the biggest users of industry loss triggers and ILW’s.
However unless any catastrophe risk trading initiative supports the placement and transfer of indemnity based catastrophe risk, it will be leaving the largest chunk of the market untouched.