Just an hour ago, we published a piece asking why acquiring hedging capacity when a major hurricane threat is in the water isn’t easier and as if by magic it transpires that insurtech Tremor Technologies will run a series of industry loss warranty (ILW) auctions this afternoon, U.S. time, which gets much closer to meeting the needs of the reinsurance market.
We asked why it isn’t simpler to “get fast, near-instant, access to a range of quotes on the industry-loss warranty (ILW) capacity available in the market that it is actually possible to buy?”
Now we can reveal that Tremor Technologies, the insurtech company that offers a technology-based programmatic insurance and reinsurance risk transfer marketplace, is answering the needs of the industry at the most challenging of times, putting its technology to work in an attempt to make ILW capacity access more seamless and simple.
Tremor will be running a series of ILW auctions later today, in the U.S. afternoon we’re told.
Each auction will feature a number of different industry loss trigger point for major hurricane Laura, with the favourites looking likely to be $10bn, $20bn and perhaps $50bn as well.
So let’s say Tremor runs an ILW auction at 1pm and the pricing clears for each of these three industry loss trigger points.
Then Tremor runs another auction at 3pm, but hurricane Laura has strengthened at this stage and so the clearance prices change somewhat.
Finally, Tremor runs a third auction at the close of the working day, at 5pm and the storm has weakened slightly, so pricing adjusts again.
This would be a fantastic example of what technology can do to help markets understand true supply and demand related to capacity at a stressed time when a live cat situation is ongoing.
Auction offerings of ILW’s also provides a real opportunity for both the buyers of protection and sellers of capacity today. Helping buyers access auction based, market consensus pricing for hedging instruments, while capacity providers can put in their best prices and be sure their capacity only gets put to work when a match is made.
The potential is there, with a tech based approach as this, to generate liquidity in the market and have that liquidity move related to pricing
This represents real progress in the space, in bringing capacity opportunities to buyers at the time when they really need it, as well as selling opportunity to those with capacity to put at-risk.
The sophistication of insurtech like Tremor’s technology can work to the reinsurance industry’s benefit, in bringing supply and demand sides of the market together efficiently at consensus pricing, allowing trades to complete based on the latest outlook for a storm like hurricane Laura.
Polling market capacity in this way, to find actual clearing prices at points in the day could be a significant advancement on what’s possible manually, or over broker desks.
Of course, none of this means any trading actually happens. But just getting markets to the table over a tech solution that offers an ability to see real market pricing, dynamically and in near real-time, is a big improvement and adds transparency in a reinsurance market that sometimes (particularly when major loss threats emerge) really needs it.
We’d advise those looking to participate to reach out to Tremor Technologies and make yourselves known.