A pair of senior reinsurance buyers agreed that using the programmatic reinsurance risk placement marketplace of Tremor Technologies, Inc. helped them to save time and money, making the process more efficient.
Speaking during a panel discussion held at the Fairmont hotel in Monaco during the 63rd Monte Carlo Reinsurance Rendez-Vous de Septembre, reinsurance buyers from W. R. Berkley and Markel Corporation highlighted the benefits of using programmatic platforms for matching risk with capital.
Melissa Emmendorfer, Senior Vice President, Insurance Risk Management at W. R. Berkley Corporation and responsible for buying reinsurance treaties for the firm, explained that it was important to ensure that relationships with counterparties were managed and maintained.
She commented during the panel discussion, “We were introduced to Tremor and utilised it for our property cat purchase last year and we’re now working on plans for using it again for 2020, with some additional features.”
“We buy a lot of reinsurance treaties with a limited staff and I’m always looking for ways to do things more efficiently.
“We have a lot of relationships in the industry and we really value them. Tremor worked with us to build features into the platform to let us value the relationships with our partners.”
Ultimately though, the goal of utilising programmatic auction technology during the pLacement of the property catastrophe reinsurance program was to add efficiency to the quoting process, Emmendorfer said. “We work with our broker throughout the entire process, but the actual collection of quotes and allocation of shares by using Tremor saved us about three weeks. My goal was to create efficiency from a timing perspective.”
Also participating in the panel discussion was Julia Chu, the Chief Global Ceded Reinsurance Officer of Markel Corporation.
Chu has also utilised Tremor’s marketplace technology to place a catastrophe program.
Having used the platform Chu said, “We found it very interesting as it created changes which mean opportunities both for clients and markets. It adds efficiency, from both a cost perspective and a capital perspective.”
She continued, “I see a lot of potential and I’m very excited about the Tremor platform. I’m a numbers person, I trained as an actuary, and I think about return on capital all the time.
“Brokers are really important in the placement process, throughout discussing the contract, the placement and execution. But the whole quoting and bidding process is sometimes cumbersome.
“With Tremor you can save time and expenses.”
Chu went on to explain how she believes Tremor can help companies better manage their capital across the reinsurance market cycle, optimising their placements and being more strategic in when to go to market with them.
“You can reduce underwriting costs and it’s also capital efficient,” Chu said. “I always think of reinsurance as a form of capital. But how do you know how much capital you need at the beginning of the year, whether the market’s hardening or the market’s softening? Why should you always buy reinsurance on an annual basis?”
“Currently you’re forced to deploy or buy your capacity, possibly at worse underwriting conditions.
“With this platform you can auction off reinsurance when you need it, as opposed to on an annual basis,” Chu explained.
Chu said that using platforms and technology such as Tremor can help companies to become more fluid in their approach to reinsurance, as it creates “a process that links the source of capital to the risk more directly.”
She said it lowers the cost-of-capital as a result, while also helping people to manage their capital better throughout the year.
Also participating in the panel discussion was Mike Nannizzi, Director of Fintech Investments at W. R. Berkley Corporation, who explained why his firm elected to invest in Tremor.
“When we think about ways that technology can enhance the business, for us Tremor really resonated,” Nannizzi said.
Continuing to explain, “There are a lot of aspects of the reinsurance placement process that require people and then there are other aspects where people need to undertake activities because there’s no other choice.
“For me, what I think is interesting about Tremor, is the ability to take some of those inefficient processes and allow technology to do what it’s best at.
“Also important, when I think about truly market-clearing mechanisms, is the independence of the platform that clears the transaction.
“It’s important for a host of reasons, we’ve seen versions of this type of independent market-clearing platform successfully deployed in several other markets- both within and outside of the financial markets.”
Adding that he sees Tremor and similar technologies as, “A natural progression of a market like reinsurance, where a platform that allows buyers and sellers to be confident that their information remains theirs and that they can more discretely manage their appetite. That’s an important subtext of Tremor for me.”
Sean Bourgeois, Founder and CEO of Tremor, commented during the discussion, “Our thesis is that if we can build technology that enables really robust price discovery and allocation, it should bring wonderful efficiencies for the market and also a very competitive marketplace.
“We started with property cat as it’s a familiar product, however we continue to get inbound inquiries about the facultative market and we’re investing heavily to support that. We’re also looking at large E&S risks. Essentially anything that has a panel on the other side of a transaction, where an auction and auction technology can help is a good place to integrate in the value chain.
“Our goal is really just to focus on those discrete points in the value chain where we can be helpful and to let the existing business flow work well, as it does, just focus on those levers that we can pull that can be helpful for efficiency gains.”
Clark Hontz, President of reinsurance broker Beach and Associates (Bermuda), Ltd. explained that he sees technology tools like Tremor as an extension of his own team and its capabilities.
“At first we thought here’s another entity coming to eat our lunch, but it turned out to be the complete opposite. Once we got to know them, went through the on-boarding process and working with markets and of course lour clients, we found that Tremor became part of our team,” Hontz said.
“Of course, we still had to do the modelling development, the submission development, the contract wording and the discussions with markets to let them know what we’re trying to accomplish.
“But once you have that, from a client’s perspective it’s a very good way to achieve price discovery, also from the market perspective it helps to set expectations of where the market is going through price transparency as well.”
Richard Boyd, Head of Capital Solutions, Allianz Global Corporate & Specialty, was the final panel participant and gave his perspective from the point of view of a company that has utilised Tremor for a slightly different purpose, in interfacing specifically with capital markets investors.
“We wanted to prove the concept, so my unit wanted to test Tremor and see it in action. For Allianz group digitalisation of the business is a core piece of our strategy, so working with marketplaces is a natural extension of that goal,” Boyd said.
Going on to explain that at Allianz, “We enjoy the transparency, the choice that it gives to investor clients. Our investor clients who are active in the financial markets are used to this type of technology. They’re used to auctions and the way products clear in the market, but coming to the reinsurance market and seeing that it was pretty opaque and difficult to understand the way prices clear has been part of an education process for all of us in the ILS and capital markets space.
“Any technology that helps to provide more transparency and clarity is important and we’re going to be active in supporting it.”
The transaction Allianz placed using Tremor’s marketplace was novel in that it featured a parametric trigger, the first such deal to utilise the auction process.
“The use-case that we had was a parametric transaction that we entered into and wanted to lay some of the risk off.
“Outside of the normal renewal cycle this was an excellent way to do something relatively quickly and in a bespoke way, for a product that was quite suited to investor clients in the capital markets,” Boyd explained.
Chu from Markel summed up her feelings on Tremor saying, “What I really like about it is that it will create more competition, which is very healthy for this industry.
“It’s very healthy for this industry in general, creating a dynamic to help people think in a newer, more competitive way.”
Broker Hontz from Beach said that he foresees using the platform to help his clients benefit from the efficiencies it can bring, in particular for those looking to access insurance-linked securities (ILS) markets.
“Instead of looking at January 1st as being the most important day of the year, our clients might want to do quarterly auctions. Because capital, which is often from the insurance-linked securities (ILS) market, capital comes up at different times in the year and the needs of a client will change over that period as well.
“We’ll continue to use Tremor to enhance the development of reinsurance in general, catastrophe reinsurance, retrocessional reinsurance and I think other types of risk in the future.”
Emmendorfer of W. R. Berkley summed up her feelings about auction technology and its future in reinsurance.
She said, “Tremor’s been very good about working with us, to make the product work better for us and our reinsurers.
“Initially markets resisted, mostly due to the uncertainty that comes with change. We work with a large number of reinsurers on this program, however, and in the end, only three incumbent markets would not utilise it last year.
On extending the adoption of modern risk marketplace technology in the industry, Emmendorfer explained, “It’s all about education and making sure people understand why we want to use it and how we think it benefits everyone. In ten years from now, people probably won’t even think twice about using such platforms.”
“To the extent we can find other ways to use it within other aspects of our business, that would be great.”
Closing the discussion Tremor CEO Bourgeois explained next steps for his company.
“To date we’ve done seven auctions and we have a fairly healthy pipeline. There’s been a lot of interest in the last quarter and we’re expecting to do about ten more auctions in the next quarter.
“2020 is going to be a really exciting year for the company. There’s generally a lot of interest in marketplaces across the industry, so there’s a nice spotlight on the space which we’re excited about and we’re looking forward to the next year.”
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