March 30, 2016
A Word With Shefi: Isaac Re
There is now a software marketplace where people can invest in bonds backed by insurance risks, improving allocation of capital.
This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Gokul Sudarsana and Rohit Rajan, the founders of NYC-based startup Isaac Re, to discuss the often forgotten space of reinsurance.
Icebreaker: Two truths and a lie:
- One of us once ate a scorpion
- One of us went to kindergarten at a South Korean army base
- One of us played in a celebrity basketball tournament
(See answers at the bottom of the post)
Describe Isaac Re in 50 words or less:
Isaac Re is a software marketplace where you can invest in bonds that are backed by insurance risks. As an investor, these bonds will provide you with attractive returns and substantial diversification opportunities for your portfolio. Simultaneously, this allows our insurance partners to make better decisions with their capital and gives them the ability to write new business, closing the coverage gap across America.
Why Isaac Re?
A core inefficiency in the insurance industry is the high cost of capital, especially in a hard market when capital is scarce. This, in turn, increases prices. By spreading risk across the larger capital market, we smooth out the insurance risk capital cycle, helping insurance companies raise capital cheaply and, in turn, make insurance more affordable to close the coverage gap.
How did the idea develop?
While I (Gokul) was working in the industry, one of the most powerful insights I gained was that the insurance capital market is inefficient. Rohit and I grew up together; his background is in engineering, and I’m an actuary. As we started talking about this problem, it became clear to us that bringing together our complementary skills and building a software-oriented insurance capital marketplace would be a huge opportunity for us.
What’s in a name?
Isaac Re is a tribute to Isaac Newton. Insurance is a prime example of a big data-driven industry. Valuing risk is built on a wide range of data sources that push and pull prices toward equilibrium, much like gravity.
Insurance is a slow-moving industry. A solution like ours fundamentally re-optimizes the insurance capital landscape. This requires the buy-in, commitment and shared vision of industry executives and thought leaders.
What does competition look like?
Right now, these transactions are highly bespoke, over-the-counter arrangements that involve large deal teams to execute. We are the first company to use software to automate the refinancing value chain.
Why Global Insurance Accelerator?
The GIA is a unique opportunity to go through an insurance-focused accelerator, which helps us quickly connect to industry stakeholders. It is a launching pad to energize the industry and build long-lasting partnerships.
What’s on your to-do list?
We are announcing partnerships with the insurance and investment communities, and our pilot transaction will be completed shortly after.
If not for Isaac Re, what would you be doing?
Hard question. The more we develop the vision and realize the impact it can have, the more we can’t imagine spending our time on anything else.
Where do you see Isaac Re in five years?
We see a tremendous growth opportunity after we prove out the pilot. We have big plans for leveraging our infrastructure down the road. Today, we connect insurers with institutional investors. Tomorrow, we can connect a previously underinsured policyholder directly with an individual investor.
Best life lesson:
Lead by example.
- One of us once ate a scorpion – Truth
- One of us went to kindergarten at a South Korean army base – Truth
- One of us played in a celebrity basketball tournament – Lie