Tremor Technologies, Inc.’s (Tremor) “smart market” platform can become a new nexus for risk transfer through its use of the latest technology that aims to improve both the efficiency and transparency of the wholesale risk and reinsurance industry, according to Sean Bourgeois, Tremor’s Founder and Chief Executive Officer (CEO).
Tremor announced in August 2018 that its open, technology-driven, programmatic reinsurance risk placement marketplace is ready for business, designed to improve the efficiency of matching risk with the right capital.
Following its launch, Reinsurance News spoke with Tremor’s Founder and CEO about the tech-driven marketplace, and how it supports a more efficient and transparent industry for global reinsurance companies.
“Tremor is a market platform that harnesses the latest smart market technology to improve the pricing and allocation of risk in reinsurance markets. The market platform supplants the final negotiation between insurers, brokers, and reinsurers: insurers design their risk programs as they do today and bring them to the platform, where reinsurers bid on the programs offered. Tremor matches supply and demand and specifies trades to be executed through current channels.
“For insurers and reinsurers, Tremor creates value by optimizing risk distribution and ensuring that trade happens at fair market prices. For brokers, the exchange increases their effectiveness monetizing insurers’ programs and creates new ways to optimize them.” explained Bourgeois.
He continued to explain that Tremor leverages technology in order to create value for both sides of the market, enabling insurers and reinsurers to express their preferences in a simple, yet powerful way.
“The market engine then creates as much value as possible and splits the gains fairly between sellers and buyers with competitive clearing prices.
“To achieve high levels of efficiency requires that market participants can express their preferences and constraints effectively and is motivated to do so. Our matching engine takes the expressed preferences and constraints and identifies the best allocation of risk,” said Bourgeois.
The marketplace that Tremor is building ensures a high level of transparency, with market rules being available to all market participants.
In order to build trust, Tremor’s market includes means of verifying that the market rules were actually followed, and market data in an aggregate form is available immediately after an auction event.
“The reinsurance market is complex. We are striving to keep the design as simple as possible, as complicating features should only be added if they are necessary and consistent with market principles,” said Bourgeois.
Ultimately, he added, “we see Tremor as a new nexus for risk transfer. We hope Tremor will be the first and the largest of a new wave of marketplaces and exchanges at the center of this new world, of course.
“I believe that tech initiatives and startups will gravitate towards this new world that we are building and continue to improve it.”
Efficiently matching risk with capital is a key element of Tremor’s marketplace, and it’s something that the firm’s Founder and CEO was eager to highlight, while noting the importance of efficient risk allocation for the evolving reinsurance industry.
“The greatest value comes in making the allocation and pricing of risk more efficient. The more efficient risk is allocated, the better able the industry is able to withstand losses and the more that pricing aligns with actual risk, the easier it is for insurers to access reinsurance where they may not have before.
“Efficient allocation of risk is particularly important as the market moves beyond a payback model with hard and soft years wherein reinsurers who paid out in one year might see a large premium increase the next year to cover some losses,” said Bourgeois.
Adding: “Our smart market brings efficiency, transparency, fairness and simplicity to a very expensive, opaque and slow moving market that is suboptimally priced. Step function improvements across efficiency, transparency, fairness and simplicity can only be achieved by utilizing programmatic technologies and batch auctions underpinned with sophisticated mathematical optimization – the core IP of Tremor that we have been building for more than two years with a world class team.”
He told Reinsurance News that Tremor has a very healthy pipeline of protection buyers, with auctions scheduled for the final quarter of 2018, with significant limit committed and sizeable revenues for Tremor.
“Our tech and our approach is clearly in demand in the market, solving important problems, dramatically improving efficiency, dynamism and competition.
“Over time, we will offer the industry a completely new approach to issuing risk – a dynamic market far more competitive than today at vastly lower cost which will benefit all participants,” said Bourgeois.