Tremor places world’s first programmatic parametric swap transaction

Another first has been achieved by Tremor Technologies, Inc., the programmatic reinsurance risk placement marketplace provider, as the firm priced and placed the first ever programmatic parametric swap transaction in insurance form.

Insurance technology (InsurTech) start-up Tremor has been steadily gaining traction as ceding companies and brokers become increasingly aware of the transaction execution efficiencies that a true marketplace can provide to them and their clients.

As an open, technology-driven and programmatic marketplace for reinsurance risk placement, Tremor is also expanding the range of transactions it can support, in response to client needs.

The firm has already priced and placed a number of catastrophe reinsurance programs beginning at the end of 2018. Most recently announcing the placement of a chunk of Markel’s property catastrophe reinsurance program and saying that further placements are on the way.

Now Tremor has placed a different style of transaction, not just a layer of a pure indemnity excess-of-loss tower.

In its latest pricing and placing, Tremor has provided an auction and marketplace enabling one of the largest global insurers to lay-off some of its parametric catastrophe risk as a swap, but in insurance form.

The placement saw this unnamed global insurance player using the Tremor platform to lay off part of a greater than $100 million layer of multi-year parametric risk in a programmatic manner to multiple risk markets.

The slice of parametric risk has been laid off to participating bidding markets, with the end result being an insurance compatible contract.

Tremor brought significant capacity supply from alternative capital markets and ILS fund players to the auction, with over 15 markets participating in the bidding.

The auction was set up and arranged in a very short period of time, we understand, which is impressive given the new transaction type that was involved.

This suggests that the Tremor platform has been designed in a flexible and extensible way, to allow for different types of transactions to be auctioned, priced and placed all through a single marketplace paradigm.

This bodes well for being able to support additional contract types in future and we understand that Tremor is also ready to support auctions for industry loss warranty (ILW) based capacity, as well as direct and facultative style placements too.

When other platforms have failed to gain traction starting with the simplest forms of contracts and transaction structures, Tremor is seemingly endeavouring to provide a one-size-fits-all solution for those looking to place their risks to capital providers in the most efficient manner possible.

The auction was organised and executed on a direct basis by Tremor with the participants in its marketplace, with no brokers involved.

The firms technology successfully found a market clearing price for the transaction and allocated the risk accordingly to the participating markets, resulting in an efficient execution that took less than two weeks end-to-end.

Commenting on this latest transaction, Tremor CEO Sean Bourgeois explained, “Tremor is very excited to announce that it has completed its first significant parametric auction with a major global insurance brand.

“As our tech is extremely flexible we are able to move between transaction types and forms across the re/insurance and alternative capital spectrum very easily which made completing this trade very simple. We expect further deal flow on the back of this transaction in addition to the pipeline of indemnity placements we have scheduled.”

Part of the reason for Tremor’s impressive traction gained to-date is its focus on the design and functionality of its marketplace, something that is particularly refreshing when many efforts to create risk trading platforms have only sought to translate the status-quo into digital form.

By concentrating on designing a marketplace that can offer efficiency gains to all sides in a transaction, as well as the broker, Tremor has something that is finding traction much more rapidly than many perhaps expected.

The prospect of efficient risk pricing, allocation, distribution and placement should excite the entire industry, as it could even result in new ways to rethink the existing tower of risk design and provide opportunities for even greater gains to be made by the industry in future as this type of technology becomes increasingly common-place.

At this time, when efficiency and cost-of-capital is so important and there is an increasing focus on getting value from intermediation costs. The use of platforms to enhance the effectiveness of transaction execution is set to differentiate cedants and brokers alike, with the smart ones embracing the benefits this kind of technology can deliver to themselves and to their clients.

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