The Chief Executive Officer (CEO) of InsurTech start-up Tremor Technologies, Inc., Sean Bourgeois, says that 2019 is shaping up to be very busy for the firm, after the successful completion of the first fully programmatic placement of a property catastrophe reinsurance program.
Tremor’s open, technology-driven, programmatic marketplace for reinsurance risk placement utilises a highly specialised skill set and purpose built, modern technology, combining deep understanding of market design, auction theory, optimization techniques and professional software development.
The company’s CEO, speaking with Reinsurance News, explained that building Tremor’s tech on an extensible, flexible stack took several years to do well.
The result, announced in December 2018, is the first programmatic auction that saw a property catastrophe reinsurance program placed with a large panel of markets from across the world, both traditional and alternative, or backed by insurance-linked securities (ILS) capital.
Discussing the placement, Bourgeois explained that Tremor was lucky to work with a highly innovative buyer that quickly understood the efficiency gains they would receive and the competitive market Tremor would deliver.
“They also understood the trade-offs, which on balance made sense for them. Most importantly, they were true leaders. Pushing through the first large panel property catastrophe program programmatically was a significant commitment from the buyer – this buyer worked together with us to explain to the market our technology and why we add value to all participants.
“This was not always easy and it was time consuming for them, especially as it was our first large property catastrophe program – we really appreciate their market leadership to see it through,” said Bourgeois.
Adding: “A broker was closely involved in this programmatic transaction and played a very important role in its success as well. We see a clear role for intermediaries to play as programmatic traders working on behalf of clients to buy protection on the Tremor platform. In the case of this transaction, the broker played a very important program design, coordination and transaction execution role.”
According to Bourgeois, the majority of reinsurers find Tremor easy to use and intuitive, with many ready to transact after just a single demo. Initially, some traditional players were uncomfortable with technology intermediating both price and limit allocation, but after time the majority of these came round, said Bourgeois.
Looking forward, the CEO said that 2019 is shaping up to be a very busy year.
“We have a number of commitments from reinsurance buyers already and we are in active discussions with many, many more reinsurance buyers (insurance companies, MGAs and retro buyers).”
In the past, numerous online marketplaces have tried and failed, with many in the space saying that the industry’s focus on relationships is a reason for this. Bourgeois told Reinsurance News that he feels relationships are important in all industries, reinsurance included.
“We have built tools that allow buyers to select specific markets and limit participations based on qualitative factors such as relationships. Our technology is meant to solve for the last mile which we believe is where technology can play the most important role in this industry – as such, relationships will always remain an important feature of the market.
“We have been very thoughtful with our market design and as such we incorporate features such as a blind sealed bid mechanism to allow both sides to trade in confidence along with robust protections for data security.
“All of this together means that relationships still drive counter party participation opportunities, but economics, math and tech take over to find final pricing and allocation. We believe that technology can complement relationships in the reinsurance industry,” said Bourgeois.
As technology continues to advance and the risk landscape evolves, the risk value chain will undoubtedly be disrupted and influenced by various forces.
One such force currently starting to grow its presence in the risk transfer markets is blockchain, and Bourgeois said that Tremor believes that in the medium-term, blockchain is set to be an important feature of the reinsurance market.
“However, as there is not a trust issue to solve today nor a clearinghouse to decentralize, we do not believe blockchain tech adds much value to the current market. Perhaps at the margin, but only after significant investment upfront. That said, fast forward a few years where the market grows from dozens to hundreds perhaps thousands of risk protection firms operating across a number of marketplaces all powered by buy and sell side programmatic tools and technologies, further powered by real time modeling tech and third party data and services – and we see an interesting role for decentralized ledger technology to begin to play.
“In short, we think that you need highly functioning centralized marketplaces with larger numbers of participants to achieve gains from blockchain – and even where this is the case, R3 is a good example, there are still no guarantees that the value is there. In general, we think that it’s a good idea for the industry to ask itself “why?” when any new tech is presented across the insurtech spectrum, blockchain included. We’re not sure we see a good, clear answer to why blockchain truly adds value to the market today,” said Bourgeois.