Artemis spoke with Tremor Technologies CEO and Founder Sean Bourgeois to understand how ceded reinsurance teams are leveraging Tremor’s technology to help them navigate the currently challenging reinsurance market environment.
Tremor is an insurtech that is getting increasing traction for its offering of a technology-based programmatic insurance and reinsurance risk transfer marketplace.
Through the use of smart market trading technology, Tremor aims to create transparent, efficient reinsurance markets. Offering a simple way to get risks in front of capital and have capital express its appetite for them, in terms of capacity and pricing.
Given the current hardening of reinsurance and retrocession, at a time when capacity providers are also tightening up on terms and adjusting their risk appetites. We wanted to explore how smart and efficient risk markets can benefit ceded reinsurance teams and risk transfer buyers.
Question: Tremor offers modern trading tech for reinsurance. How can traditional buyers try out Tremor in a meaningful way in a hardening market that improves outcomes and also involves their broker?
Sean Bourgeois: Tremor’s informed panel (IP) bidding is a great way to insert Tremor’s tech into the traditional process to get started in our marketplace. IP bidding supercharges the placement process and offers cedents the opportunity to secure terms from panelists in as little as 48 hours.
IP bidding mimics the traditional placement process with one key difference – after a cedent and their broker have identified their lead market and lead pricing, the rest of the panel is invited to bid individually on Tremor. The cedent posts their lead pricing target to a panel of reinsurers and Tremor runs an auction to clear the market for the rest of the panel, who can bid at or better than lead pricing.
Q: Why does the cedent expose their pricing to reinsurers with IP bidding?
SB: Exposing your lead pricing and lead market anchors the rest of the market and allows followers the opportunity to compete for more of your program at more competitive prices.
Q: Why would followers bid below lead pricing?
SB: That’s the magic of our marketplace – followers today typically accept or reject FOT, assuming they are offered a line. On Tremor, every follower competes and either offers lead pricing or better-than-lead pricing to try to win more share of a program. Following markets appreciate the opportunity to win more share, cedents appreciate more competitive pricing and leaders appreciate the premium they receive.
Q: How much faster is the Tremor process?
SB: It might take several weeks to complete a traditional placement. On Tremor, we can wrap up an entire placement in 48 hours or less, with at (or better than) lead pricing. That’s the beauty of this process.
Q: But it’s a hardening market in reinsurance right now, will this still work?
SB: IP bidding is a nice coordination strategy that can be very effective in a hardening market. IP bidding anchors the panel at lead pricing and offers everyone an opportunity to bid. Even in a hardening environment a more competitive result can be found; reinsurers are happy because they get the opportunity to win more share. The nature of the placing event on Tremor establishes a finishing line which is important in a hardening market.
Q: Do I still have control of my markets and over who can bid?
SB: Absolutely! You are in complete control of which markets are invited and you can cap maximum allocations to manage capital concentration and credit quality mix. Tremor has over 100 markets signed up and trained on how to bid and we easily can add more.
Q: As a ceded reinsurance buyer, how is my broker involved in this process?
SB: Your broker plays a critical role – from advisory to program design, from structuring to marketing your submission and securing lead pricing with this type of bidding. All of these important tasks remain the same. Tremor plays a very specific but powerful role with IP bidding. We clear the remainder of the market competitively and efficiently.
Q: Do brokers like this approach, and does it save them time and cost?
SB: As to whether brokers like it, to be honest it is a mixed bag. Some brokers are concerned the technology infringes on their role. Others like the ability of Tremor’s technology to allow them to spend the bulk of their time anchoring more deals with big markets and less time filling them with smaller ones. Tremor’s technical coordination saves brokers weeks of work once lead pricing is finalized. When brokers gain this time and cost savings, they can deliver more competitive terms to the client.
Q: What if I don’t want to start with lead pricing and a lead market and I’d rather just auction my program to get the most competitive price overall from everyone?
SB: This is exactly what our market was built for! We offer IP bidding to reduce uncertainty and to make it easier for cedents to start to use Tremor in a meaningful way. However, our market works better and better with fewer constraints. Once cedents are comfortable with IP bidding, they can try more advanced bidding strategies on Tremor. In fact, many cedents use Tremor in exactly this way.
Q: What feedback do cedents gain by using Tremor? Are they getting a different picture, more data, less data than the traditional market? Is there a reason to use Tremor beyond price and cost efficiency?
SB: Yes, data is at the heart of what powers our capability to find market clearing prices super efficiently. We share rich analytical data with the market to enable more trade. For example, once a transaction is completed on Tremor, we share anonymized capacity and price data in aggregate, so that buyers and sellers can see very clearly what the market would have bought at thousands and thousands of price points – something that is not possible in a traditional negotiated market. The more you use Tremor, the more data you receive and the more data-driven your placement decisions can be.
Q: Congratulations on your new funding round. Raising funds is not as easy as it has been for insurtech’s right now. What’s your secret?
SB: I attribute our success to several things. First, Tremor is beyond the proof-point of its technology with several significant repeat auctions under our belt. Second, Tremor’s proprietary technology is unmatched. Finally, our investors understand that the reinsurance industry is ready to leverage technology to create a transparent market. All major capital markets utilize robust technology for price discovery. It’s time for the reinsurance industry to follow their lead.
Q: What does Tremor make of Ki Insurance, an algorithmic underwriting syndicate backed by Blackstone?
SB: We are excited by this initiative and we think it will be one of many that incorporates advances in machine learning (ML) applied to risk underwriting in certain settings. Ki can truly optimize the value this ML brings to the market by integrating it with programmatic trading to determine true market pricing.
Were Ki to integrate directly into Tremor’s marketplace, it would allow us to automatically send them underwriting opportunities, each with a risk profile, a lead market and lead pricing for Ki to process algorithmically and return their underwriting decision programmatically. To us this is a perfect fit. A programmatic marketplace like Tremor can help ventures like Ki truly scale and bring further efficiencies to the market.
Our thanks to Sean Bourgeois, CEO of Tremor Technologies, for his time and thoughtful answers.
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