Sean Bourgeois, the chief executive officer of Tremor, often hears people say that his company’s reinsurance price optimization technology works best in a soft market, when there’s a lot of competition and everybody wants to be on programs.

That’s incorrect, he stressed. Tremor provides “the perfect clearing price, whether the market is hardening or softening.”

Read related article, “Why Reinsurance Prices Are Wrong—and How to Fix Them” for a detailed description of how Tremor works.

In a softening market, oversubscription is more prevalent, but even in a hardening market, some oversubscription can occur, he told Carrier Management in a recent interview. “Tremor is still going to get you the best price regardless of a hardening or softening market.”

And, there also can be a problem with undersubscription in the traditional market, which, he said can be just as bad as oversubscription—and occurs during both hard and soft markets. “If it’s a rapidly hardening market, prices may be accelerating and then suddenly your program is dramatically short if your broker guesses wrong—then you pay the price for being wrong.”

When the program is undersubscribed, the broker has to double back and the ceding company can end up with much higher prices for the risk.

If a broker undersubscribes a program and guesses too low on the initial price, the ceding company will pay a hefty penalty to fill the balance because the process needs to start over. Reinsurers will know the firm order terms were far too ambitious and filling the remainder is going to cost the buyer a huge premium, Bourgeois said.

“Tremor resolves this problem by showing the ceding company the optimal clearing price required up front.”

Getting to Know Tremor and Bourgeois

Tremor was launched late in 2017 and spent the following year building the application and then went to market in late 2018 when it was able to sign up about 70 reinsurers as members. Over the past three years, it has been steadily building its marketplace and now has 11 insurance company and 115 reinsurance company members. Members include Lloyd’s syndicates and insurance linked securities (ILS) funds.

Bourgeois said that discussions are under way with 70 more insurers around the world, and most of the major reinsurers are members of the platform. “There are about 300 to 400 [insurers] that we would very much like to do business with and maybe 500 to a thousand that could benefit from using Tremor.”

In terms of capital on the Tremor platform, Bourgeois said there’s about $500 billion of reinsurance capital available for ceding companies that want to place programs. Included in that total are 33 individual Lloyd’s syndicates and their managing agencies, which Bourgeois said represent about 70% of the market, or $33 billion of capacity. To date, Tremor has priced a bit more than $4 billion of reinsurance risk.

Tremor has raised more than $20 million and its investors include W.R. Berkley, Markel, Nephila, and several venture capital firms.

Bourgeois, who is both founder and CEO of the Boston-based technology firm, started his career in financial services as an associate at Putnam Investments in Boston. He then moved into the reinsurance industry and trained as an underwriter at Constitution Re, which was later acquired. He then moved on to Transatlantic Re, underwriting in both in the European and U.S. markets.

He spent a third of his career in reinsurance, which provided him with the overall view that the market needed to become more efficient.

Bourgeois subsequently moved to the technology sector where he worked for companies like Yahoo! and AOL where he worked on marketplace product teams designing market clearing mechanisms powered by technologies similar to what powers Tremor today.

With these types of career experiences he had a bird’s eye view of how the ad market moved from a subscription market to a programmatically traded market over a short six or seven year period. “These companies created an ecosystem of multiple exchanges, bidding technologies, and data management platforms. It took a number of years for programmatic markets to succeed, but once they took off, these markets never looked back.”

It provided him with the idea for a programmatically traded market for the reinsurance industry.

Bourgeois holds a Bachelor of Arts degree from Brown University, a Master of Science degree from Northwestern University and a Master’s of Business Administration from the University of Chicago.

(Read related article, “Why Reinsurance Prices Are Wrong—and How to Fix Them” for a detailed description of how Tremor works.)