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Tremor Opens Weekly Industry Loss Warranty Trading

March 26, 2020

Tremor’s Online Marketplace to Ensure that Re/insurance Trading Continues

The traditional insurance and reinsurance market is facing many challenges due to COVID-19. In light of the importance of keeping re/insurance trades flowing, Tremor is opening weekly online Industry Loss Warranty (ILW) auctions beginning April 2, 2020. The company will host a weekly auction every Thursday to ensure that the ILW market continues to operate while bringing additional efficiencies to the process. Buyers and sellers of ILW protection are welcome to participate.

Tremor will post a range of common ILWs in each auction. Interested parties can submit blind, sealed bids to buy and/or sell the posted ILWs; upon the close of bidding, Tremor will compute a market clearing price for each ILW and consequent trades.

  • US wind and earthquake perils will be available initially, followed by additional regions and perils in coming weeks.
  • Each structure will have a fixed insurance form and ISDA form contract wording from which participants may choose.
  • Participants are not known to each other in advance, and bids are blind and sealed; Tremor will reveal identities after the auction for parties who transact. Participants who are unable to transact in the auction will not have their interest revealed.
  • An A.M. Best credit rating of A- or better or fully collateralized commitments are required for protection sellers.
  • The bidding window will close at the end of the day each Thursday, the auction will run and results will be reported the following day.
  • Tremor will publicly report the clearing price for each ILW; when no trade clears, Tremor will report the spread to the first dollar of trade.

Tremor’s powerful, proven market clearing technology enables participants to execute complex trading strategies. Bidders commit to the quantities they want to buy or sell at each price. Bidders can also leverage complex constraints to transact the coverage that is best for them, for example, to sell only the $10M of ILW protection that offers the best margins. These tools allow bidders to trade with confidence in the face of today’s challenging market.

“The re/insurance market must remain open for business, Tremor intends to not only play its part to ensure that this happens by helping to facilitate traditional transactions, but we are continuing to modernize trading in the process. While some in the market are calling for delays and automatic contract extensions, we believe that we can help the market transact faster and more efficiently with our fully cloud-based marketplace technologies - even when facing the enormous challenges the market faces today”, said Sean Bourgeois, Founder & CEO of Tremor.

To further this effort, Tremor has partnered with PCS, a Verisk business, and will use PCS catastrophe loss estimates for the United States, Canada, Japan, and the Asia-Pacific region as well as global cyber as the reference trigger on transactions cleared. “I’ve been a believer in Tremor since its earliest days and feel strongly that their technology can help address an important need in the global ILW market, said Tom Johansmeyer, head of PCS. He added, “Increased demand for ILWs over the past twelve months could potentially increase even more as a result of the impact COVID-19 could have on market conditions. The time is right, and the team is right. Tremor’s approach to market design should help protection buyers and sellers operate efficiently. We look forward to supporting Tremor in this initiative, particularly as we add more risk areas to our portfolio, which will help Tremor broaden its support to the global re/insurance industry.”

In addition, Tremor will be partnering with brokers in innovative ways to help bring trades to its continuous ILW marketplace. The company believes that brokers will continue to play an important role providing guidance and technical expertise as needed.

While the company is sensitive to the challenges of the marketplace today, Tremor is determined to ensure critical re/insurance trading takes place. Tremor representatives and our broker partners will be reaching out to both sides of the market ahead of our first planned auction event on April 2nd.