Following the successful completion of the first fully programmatic reinsurance transaction, Artemis spoke with the Chief Executive Officer (CEO) of InsurTech start-up Tremor Technologies, Inc., Sean Bourgeois, about the placement, as well as the involvement of the insurance-linked securities (ILS) space.
Tremor, the creator of an open, technology-driven, programmatic marketplace for reinsurance risk placement, announced recently that it had successfully completed the first fully programmatic placement of a property catastrophe reinsurance program for a top-20 U.S. P&C insurer.
Nearly 50 markets participated in the auction, and Bourgeois explained exactly what it means to have executed the first transaction of this kind.
“On the Tremor marketplace, buyers and sellers of protection submit rich sets of preferences and constraints including sets of price and quantity pairs. Our tech then runs batch auctions to find market clearing prices that maximize gains from trade.
“Price determination and limit allocation is all done programmatically based on pre-determined inputs and completes very quickly as compared to a traditional subscription market approach. Market participants can also integrate directly into our stack utilizing our set of APIs to fully programmatically execute risk protection preferences,” said Bourgeois.
He continued to explain that the reinsurance panel that participated in the placement was large and truly global, consisting of almost 60 reinsurers coming from the UK, U.S., Bermuda, Europe, Asia, and some backed by the ILS market.
“The Tremor platform is highly flexible and we can transact proportional, non-proportional, treaty and fac business. Large property catastrophe programs are nice as they typically have large panels which our technology solves for extremely well – the larger the panel, the more complex for the traditional market.
“For Tremor, this actually enables our tech to perform even better – but as noted, we can easily handle much smaller panel programs just as well,” said Bourgeois.
Importantly, the majority reinsurers and ILS managers that used the platform found it both intuitive and easy to use, with most completely ready to transact after just a few demo sessions. Bourgeois said that this is fundamentally different to the indicative price / FOT / line signing process of the subscription market.
“Some of the most traditional markets were initially uncomfortable with technology intermediating price and allocation, but even the vast majority of these markets came around and we had nearly 50 submit bids.
“The best part is that all participating reinsurers now completely understand how to bid for risk on Tremor – today we have over 70 reinsurers and managers representing almost $400 billion of capital fully on-boarded, trained and ready to participate in future transactions,” he added.
The recent expansion of the ILS market and the increasing influence it has within the reinsurance market, has also seen the sector look to participate in emerging technologies and products across the risk transfer industry.
Bourgeois explained to Artemis that Tremor’s platform is both open and appropriate for ILS funds, with the company’s mission being to “enable the transfer of risk to those best able to bear it as efficiently as possible.”
“We believe that there is a much larger market for risk and much more risk to be insured and reinsured if transferred efficiently.
“Tremor welcomes all types of Insurance and reinsurance participants in its marketplace, including alternative capital providers. In fact, many ILS funds participated in our 2018 auctions. Our platform is well suited to those looking to access risk easily and programmatically – especially those building sophisticated portfolios benefitting from the ability to express rich sets of preferences as part of the bidding process.
“A number of ILS funds have embraced our technology because we offer these features and we look forward to growing our relationship with them,” said Bourgeois.
According to its CEO, Tremor is focused on the last mile of wholesale risk and reinsurance transactions. Focused on finding market clearing prices and allocation using auction technology and optimization mathematics, as it believes that this is where technology can have the most immediate and influential impact on the industry.
Describing its platform as easy to use and intuitive, Bourgeois provided some insight into exactly how insurers and reinsurers use Tremor’s tech-driven platform.
“Tremor is a highly flexible platform that conforms to the market and focuses on solving the “last mile” with an intuitive interface to find market clearing prices and to manage allocation extremely efficiently.
“In practice, this means that program design, submission construction and final contract execution happens as it does today. In some cases the broker will send the entire submission to reinsurers directly and in other cases Tremor will house the submission in a private virtual data room.
“We assist the protection buyer to set up their proportional or non-proportional treaty or facultative program and to load their submission and reinsurance contract (which must be finalized before bidding opens). The buyer decides if they would like a broker to have view or edit access (or no access) to their account. The buyer then decides when they’d like the auction to run, how long to set the bidding window (the amount of time reinsurers have to enter bids – typically a few days) and then they select their reinsurance panel and assign limit caps per reinsurer if they would like to do so. If the selected reinsurers are already on-boarded on Tremor, they will be notified on-platform of the new opportunity. If not, they will be contacted by the Tremor team and personally on-boarded and trained to bid.
“During the bidding window the buyer and sellers enter their price and quantity preferences and constraints (if any) as blind sealed bids. Tremor then runs a batch auction at the predetermined auction date, finds market clearing prices contemplating preferences and constraints and determines optimal allocation of limit to maximize gains from trade for all participants.
“After the auction completes, participants are notified that results are ready to view and all participants can log in to Tremor to see clearing prices and their allocations and print their results for audit purposes. Lines are signed based on our results and the pre-agreed contract is executed.
“While the very first transaction for a buyer can be time-consuming to organize, subsequent transactions are extremely fast and easy to execute. We envision continuing to build features to make transactions easier and easier to execute on Tremor and we continue to collect great feedback from the market to help guide our roadmap,” he explained.
He added that 2019 is shaping up to be very busy for the company, with numerous commitments from reinsurance buyers already, and a number of other active discussions with many, many more reinsurance buyers including insurers, MGAs and retro buyers.
On a final note, Bourgeois gave his thoughts on what the industry might look like in a few years, in light of rapid change driven in part by the rise of technology and its influence across the risk value chain.
“We think that we are on the cusp of massive systemic change for the industry that will bring exciting efficiencies and opportunities to firms across the value chain that embrace them. As noted above, we see a world where the subscription market exists, but a larger and larger share of risk transacts programmatically via a completely new ecosystem of marketplaces, exchanges, buy and sell side programmatic technologies and data management platforms.
“We believe that risks will begin to be unbundled and will transact much more often, more dynamically with much more efficiency,” said Bourgeois.