Relm: four years and still innovating
While some of Relm Insurance’s original lines of business may have softened slightly, Bermuda’s first insurer to obtain the Island’s Innovative Insurer General Business licence continues to evolve to keep pace with innovation, as CEO Joseph Ziolkowski explains to Bermuda:Re+ILS.
Now in its fourth year of operations, having secured its licence from the Bermuda Monetary Authority (BMA) in December 2019, specialty insurer Relm Insurance is showing no signs of slowing down. While traditional market conditions in some of its original core lines of business are softening—the opposite of wider trends in the property insurance industry—Joseph Ziolkowski, founder and chief executive officer, sees it as an opportunity to continue innovating.
“Our objective is to provide insurance solutions for companies that are doing important, but edgy and innovative things,” he says. “If you’re doing something outside the box that’s trying to make financial services function better, enhance the security of sensitive information or maybe treating neurologic diseases in a way that is outside the norm, speak to us.
“We want to learn as much about your business as we possibly can, put our capacity on you and come up with solutions.”
In some ways that approach fits perfectly with the original mission statement of Relm (which was the first commercial insurer globally to hold Bermuda’s Innovative Insurer General Business [IIGB] licence): to address the scarcity of traditional insurance capacity available to nascent markets and play an active role in bolstering the resilience of innovative industries. But it also represents a necessary shift, due to market conditions in some of the lines it started out in.
Ziolkowski says that while the property market might have hardened significantly over the last 12 months, many of the lines it writes, such as liability business, professional lines, and D&O, have softened in the traditional market over the last 12 to 18 months. A big reason for this has been a lack of initial public offerings (IPOs) and deals via which private companies go public by merging with special-purpose acquisition companies.
“The IPO faucet has almost been shut off,” he says. “But many of the largest D&O markets in the world forecast budgets based on anticipated level of activity in those spaces. When that activity dries up, you have a lot of capacity sitting on the sidelines. And whenever there’s more capacity than demand, things start to soften.”
Amid the changing dynamics, Relm continues to diversify. It has looked to sectors including Web 3.0, alternative therapies, eSports and online gaming where rates and terms and conditions are much better. Ziolkowski acknowledges that companies doing innovative things can also have variability and volatility, and that is why Relm takes due diligence seriously and looks at all aspects of technology and innovation.
The other space it is targeting is cutting-edge technology companies, some of which use cryptocurrencies. He says Bermuda’s Digital Asset Business (DAB) Act 2018, the statutory basis for regulating DABs in Bermuda, has been helpful in this regard. One of its conditions of approval is satisfying minimum limits of professional indemnity coverage.
“If you can’t check the box on professional indemnity coverage, you won’t be able to begin your commercial pursuits.” Joseph Ziolkowski, Relm Insurance
“If you can’t check the box on professional indemnity coverage, you won’t be able to begin your commercial pursuits,” he explains.
But, he says, there are companies operating in this digital space that are truly innovative.
“These companies are building out cool applications and doing an integration with a traditional financial services or technology firm. But the contracts they’re engaging into have minimum insurance requirements for specific lines of coverage and specific limits.
The inability to access this coverage prevents these contracts happening.”
This is where Relm fits in. “The availability of our capacity to work closely with our broker partners and insureds to find solutions for some of these non-standard exposures becomes a very important springboard. And that goes for capacity in general supporting companies where the rest of the market isn’t generally as accommodating.”
As part of its growth, in January, Relm announced an expansion of its strategic fronting partnership with Trisura Specialty, enabling it to provide capacity in support of AM-Best rated paper for US digital asset risks. The full-fronting agreement with Trisura will span Relm’s book, enabling the carrier to provide US digital asset businesses with a range of financial and professional lines and specialty coverage solutions (including D&O, cyber, tech E&O, crime, and more) on AM Best-rated paper.
Ziolkowski says the deal increases the accessibility of its capacity to companies operating in the US, satisfying local insurance requirements and stakeholder requirements regarding credit ratings. “In certain instances, companies or contracts mandate coverage being issued by an AM Best-rated company.”
“The ability for Relm II to accept collateral in either fiat or crypto is a ‘critical distinction’ within the collateralised reinsurance space.”
Into the crypto world
Ziolkowski notes that the DAB Act represents the epitome of why Relm chose Bermuda as its base.
“When it came time to find a home there was a shortlist of other jurisdictions but Bermuda had two important advantages: it has been the centre of so much innovation over the last 40 years and its sophisticated regulatory framework accommodates things that typically fall outside the square box of insurance.
“Second, the BMA is keenly aware of regulatory oversight for DABs, which was very important. As far as we’re concerned, Bermuda has been a great jurisdiction with a ton of support and informed and supportive service providers that want to help us continue in finding incremental wins toward providing capacity.”
Backing up this point, Relm last year announced the launch of “the world’s first fully regulated collateralised reinsurance business that can accept both fiat and crypto as collateral” to enable the creation of regulated reinsurance capacity for companies operating in the
crypto space.
“These businesses are pioneering new technology, products and services and need much higher limits of insurance protection than the current re/insurance market is able to provide and this capacity in turn will enable Relm to expand its support for crypto businesses to achieve significant scale and growth with enhanced levels of insurance protection,” said Relm at the time.
Ziolkowski explains that the ability for Relm II to accept collateral in either fiat or crypto is a “critical distinction” within the collateralised reinsurance space. Relm can now tap into the “substantial” pools of aligned investor capital in support of traditional lines of coverage, such as D&O and professional indemnity, as well as Relm’s product launches for smart contract failure insurance, cutting insurance and bitcoin-denominated crypto theft insurance, among others.
“We set up Relm II as the vehicle through which we can raise aligned investor capital, denominated in fiat or digital assets to start building larger limit capabilities for us on the direct writing side of things,” Ziolkowski concludes.
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