Reinsurers are price takers in the firm order terms (FOT) process. The cedent sets pricing and then solicits authorizations from reinsurers – while coverage terms may be negotiated, prices are held firm. Even when reinsurers are invited to quote before terms are set, final pricing is driven largely by broker models and advice.
Pure price-taking is a compromise in any market. It simplifies the process but limits the breadth of ways that buyers and sellers can come to terms. This compromise is rarely worthwhile in large, complex transactions like reinsurance.
Reinsurers are price-takers in FOT largely because the market lacks the tools to bring price into the negotiation. Negotiating price on every line in a syndicated placement is largely impractical – individual price negotiations are demanding and a single failed negotiation can ruin a placement.
In this post we will discuss how Tremor’s Panorama uses modern economic principles to do better. With Panorama, reinsurers authorize pricing earlier in the process so they are no-longer price-takers. We will see that this is good for reinsurers, who gain a voice, as well as cedents, who can finalize prices based on real data. We will also unpack a few common reinsurer misconceptions – such as the (incorrect) belief that they lose control when they use Tremor – and show how they come from having a stronger voice. Overall, we will see that giving reinsurers the right voice improves placement for cedents and reinsurers alike.
An economic view on price-taking
A buyer or a seller is a price-taker in a market when they face a simple take-it-or-leave-it offer with no ability to negotiate. Price-taking is common behavior in markets with simple, small, frequent transactions because the effort required to negotiate is not worth the potential benefits. It is rare in markets with large, complex transactions because negotiation is often critical to success.
For example, consumers in Western economies are generally price-takers. Both consumers and sellers rely on the fact that they buy and sell many things – it’s better to let a few transactions be suboptimal and learn (buy from a different store next time, change the price tomorrow, etc.) than to individually negotiate every item.

Take-it-or-leave-it pricing
In contrast, price is almost always negotiated for large transactions. Consider buying a house – dealing typically starts from a listing price that is negotiated down (or competed up) before a final price is reached. A seller who dictates a strict take-it-or-leave-it price is unlikely to get the price right and risks failing to transact.
Price-taking in reinsurance is suboptimal. The cedent’s FOT will never align perfectly with reinsurers' view on price, inevitably creating tension that leads to a drawn-out process to finalize the placement. Yet, the prospect of opening individual price negotiations with each member of a reinsurance panel is equally unappealing in the current process. FOT is thus a concession to practicality – without a revolution in process and technology, FOT is the best that can be done.
Voice and control on Tremor
Panorama revolutionizes the placement process and gives reinsurers a voice. It turns the process around – instead of requiring the cedent to finalize prices before collecting authorizations, Panorama solicits authorizations from reinsurers first. Each reinsurer’s authorization, which includes price information, becomes part of the aggregate market Panorama that informs the cedent’s final pricing. When the cedent subsequently finalizes prices, reinsurers are more likely to get what they want and the placement wraps up within days.

The cedent sees aggregate supply representing the voice of every reinsurer that authorized capacity.
Having a voice is valuable for reinsurers, but two common misconceptions often make it seem otherwise:
Misconception 1: As a reinsurer, I lose control when I use Tremor. In FOT, you authorize a single line at a single price; in Panorama you authorize different lines at different prices and wait to find out your final line. Naively, it feels like you have lost control because you have to wait for Tremor’s result, but this comparison is misleading. In Panorama, your authorization tells Tremor precisely what you would authorize at every possible set of prices the cedent might choose, so once the cedent sets prices you will get the same thing as if you had responded to FOT at those prices. (In fact, Tremor is better because there are fewer sign-downs, see our blog post on controlling your allocation for more on controlling your allocation.) Alternatively, if we compare both processes before the cedent sets prices, you have far more control over the final outcome in Panorama because your voice influences the final pricing. In either comparison, you have at least as much control with Panorama.
Misconception 2: As a reinsurer, I am disadvantaged by going first. Another common misconception fixates on the benefits to the cedent. It is undeniable that the Panorama view is incredibly helpful to the cedent when setting prices, but the flipside is that the cedent is limited by what you and other reinsurers have offered. Much like going first in a game of chess, going first allows your view on pricing to help set the tone for the placement.
Using your voice
As a reinsurer, understanding your voice and using it effectively are key. The reinsurers who benefit the most from Panorama are those who put forward authorizations at true best-and-final pricing. These are the reinsurers whose authorizations strongly influence where the cedent sets the final price.
Some reinsurers squander their voice by authorizing at asking prices instead of final prices. Cedents know the difference between quote/asking prices and final prices, and they will generally ignore capacity on Tremor that is not realistically priced. Even if the cedent offers them a second chance to help fill a partial placement, these reinsurers would have been better off authorizing at final prices the first time around so their voice could influence pricing.
Learn more
As a reinsurer, Panorama gives you a powerful voice. If you would like to learn more about how you can make the most of it or have other questions, reach out to us!