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Hurricane Laura Final Hour Coverage, August 2020

August 31, 2020

Tremor Technologies offered final hour coverage as Hurricane Laura approached

As Hurricane Laura moved towards landfall, Tremor was busy offering hedging capacity to the marketplace. We started receiving calls early that morning from buyers looking for hedging tools and sellers wanting to supply capacity. We saw the market need and acted, scheduling auctions for that afternoon. The $10B, $20B and $50B named storm ILW auctions were scheduled at 3, 5 and 7pm ET on Wednesday.

“With Laura’s rapid evolution, the buyers and sellers contacting us were trying to get a pulse on the market and see if there was appetite to drive live cat trading – the current market is really opaque, and participants were grasping for signs of life before taking action themselves,” explained Chris Wilkens, Chief Product Officer at Tremor.

How can Tremor complete an ILW auction so quickly? Tremor’s smart market leverages a proprietary programmatic trading platform. It’s the perfect risk management tool for a hurricane, where the outlook may change from hour to hour. Tremor’s ILW auctions keep all parties confidential with blind, sealed bids. Counter parties are not revealed until a trade happens and individual preferences are never revealed. A large market can be brought together extremely quickly where price and allocation can be determined in hours. This is one reason that our forum offers a huge advantage to traditionally brokered transactions.

Tremor began running mid-year ILWs this spring, to ensure market liquidity during Covid. Transparent ILW auctions are a critical part of an efficient risk transfer process. In the first six weeks, Tremor saw an average of more than USD 60M capacity offered and USD 30M of protection requested each week. Tremor establishes a standard basket of ILWs that are traded on schedule and reveals rich information about aggregate supply and demand. This allows everyone to trade with confidence that the structures they need will be available at a fair market price.

“Effective live cat requires coordination. Today, it is uncoordinated. When you get a deal on the line you have to sign it ASAP; if you take the time required to collect second opinions, the opportunity will evaporate. This means that only the most obvious deals go through, and nobody knows if the price was right,” said Wilkens. “Many groups stay on the sidelines, ultimately sitting out because the market has no pulse. Tremor’s platform gives the market the pulse it needs – coordinated events bring buyers and sellers together, ensuring that all willing parties can be matched at fair prices in a matter of minutes.”

ILW auctions are just one example of how Tremor offers liquidity and transparency to the reinsurance marketplace. Tremor’s technology is also the perfect risk management tool for large placements. Tremor prices and allocates placements for ceded re teams throughout the year.

Tremor creates and shares a detailed data analytics report for each placement with information about aggregate supply and demand. Participants get smarter about market and pricing trends before their next placement.

Competitive markets are an innovation for the reinsurance industry, despite the fact that they are the standard for most financial markets. Once the industry can rely on dynamic liquid markets, participants will gain true price discovery, speed, efficiency plus cost and time savings. Tremor is proud to be transforming the reinsurance industry through innovation.