As a reinsurer, Tremor’s powerful authorization tools uniquely allow you to control your allocation while having a strong voice in the placement process. We recently discussed how to use supply curves to control your allocation and how Tremor gives you a stronger voice in the placement process – in this post, we will focus on excess of loss (XoL) towers and highlight a few of the the higher-level strategies that Tremor’s authorization tools make possible, including:
- Maximizing profit
- Targeting a total allocation
- Following at the market price
- Indicating preferred/contingent layers
Constraints are an important complement to supply curves. Supply curves let you indicate pricing for individual layers in an XoL placement, while constraints let you indicate how those layers are related. Two standard constraint types are available in most XoL placements:
Maximum line - A maximum line allows you to cap your total allocation across (a subset of) a program. For example, you might wish to limit your exposure to lower layers of an XoL placement.
Subjectivity - A subjectivity allows you to make certain “non-preferred” allocations contingent on other “preferred” ones. For example, you might wish to make allocation on a lower layer contingent upon allocation on higher ones.
An authorization strategy combines supply curves with key constraints to achieve a higher objective. Some common strategies include:
- Maximize profit – Tremor works for you when your lines are capped and finds an allocation that maximizes your margin. You can use this to your advantage to maximize profit: price each layer at your cost so that the margin above your supply curves represents profit, then add a maximum line constraint and let Tremor find the layers that are best for you.
- Target a total allocation – Many reinsurers target a total allocation by authorizing at competitive prices up to their target, then ramping up to higher prices. This gives you an allocation that is close to your target while still taking advantage of layers where you are
- Follow the market – Concurrent terms make it easy to follow the market: simply provide a flat supply curve at the minimum price you would want to follow.
- Contingent layers – Subjectivities allow you to identify preferred or contingent layers, guaranteeing that you will only get contingent layers if you also get preferred ones.
Our self-driven demos let you try these strategies yourself. Visit our knowledge base and read our article on authorization techniques for XoL placements – the article will walk you through each strategy using the self-driven reinsurer authorization demo.
If you would like to learn more about authorizing capacity or have other questions, reach out to us!