Time to call in the CavalRe!


Dear friends.

As some of you know, the past 2 years of my life have been hard (to say the least). The failure of Axia was financially and emotionally devastating to me and it rocked my self confidence to the core. Although I'm grateful that almost all of my former staff landed on their feet with new jobs and are doing good today, one dear friend didn't and tragically took her own life. She was a beautiful person who brought an invaluable light to the office beyond the job and I still miss her and her southern Californian accent (which was refreshing to hear in Asia). A part of me will always think that if Axia didn't fail and she had a comfortable place to show up to every day, she'd still be with us.

As a founder, I never believed in taking money out of my startup. I paid myself just enough to cover living expenses and my personal bank balance was literally close to zero at the end of each month. When we failed, not only did I lose my company, I lost the home that my wonderful wife loved so much. She put so much of herself into that house turning it into her dream home and, in an instant, it was gone.

As painful as that was, it pales compared to having to send my kids away. Without income and no liquid assets, I could no longer pay the international private school tuition for my kids from my first marriage so we accelerated our plans for them to move back to the US with their mom. Putting my kids on that plane just before Christmas 2018 was one of the hardest things I've ever had to do.

I was a bit lost for a while. I even thought about going back to corporate life. I remember speaking with the Chief Human Resource Officer at a large regional insurer in Hong Kong after a series of senior meetings and she asked me what I wanted to do. I said, "I want to start another company." My ex-wife always calls me "stupidly honest" and I guess she is right! I am made for startups. My entire nonlinear career and my unique combination of business and science has prepared me for running an industry-changing startup. There is nothing else I want to do.

Up to that point, I had been spoiled as an entrepreneur. I had two amazing partners - Fred Ngan and Michael Chan - with my first startup, Coherent. When I spun out my second startup, I had two amazing partners - Joseph Sullivan and Marvin Perez - and that startup became a holding company of Axia. Now, here I was, not sure what to do and I didn't have a partner. Looking back, the hit to my confidence when Axia failed got me into a state of mind where I thought I needed a cofounder to move forward forgetting that I built up Coherent from nothing myself for over a year before bringing Fred and Michael on. I floundered around a bit trying things here and there with a few potential cofounders, but I was always bending too much away from my passion. I've been on a crusade to change the insurance industry and straying from that felt like trying to swim against the river.

In June 2019, a friend of mine (and awesome entrepreneur) - Dann Angelo De Guzman - introduced me to Entrepreneur First and I was accepted to the third Hong Kong cohort in July. Entrepreneur First is a great program and I recommend it to anyone considering taking the plunge into entrepreneurship. I met some amazing people during EF (special shout to Sebastian Ko and Rohit Apte) and being in that environment with those amazing people helped restore some of my confidence. Ironically, the purpose of EF is to help entrepreneurs find a cofounder, but what I rediscovered during the process is that I don't need a cofounder to move forward. I had been using my lack of cofounder as an excuse. No more. I was back!

I had been using my lack of cofounder as an excuse. No more. I was back!

Then, in November 2019, some issues arose with my kids so after being away from them for nearly a year, I hopped on a plane back to the US after 10 years in Asia with two bags and no real plan other than to be there for them. I wrapped up a remote contract with a London-based startup working for the Bank of England and in January 2020, started work full-time on the startup I've always wanted to build here in Silicon Valley.

Time for the CavalRe!

CavalRe represents the culmination of everything I've learned throughout my career at some of the world's finest research and financial institutions as well as at some of the finest startups (my own - yes, I am biased!). CavalRe is me.

At its heart, insurance is about the pooling and managing of risk. There are two ways to manage risks:

  1. Keep it and manage it yourself.

  2. Get rid of it by transferring it to someone else.

Both are important, yet somehow in my years in corporate insurance I never got directly involved in reinsurance (other than to question our assumptions about our counterparty risk to them - which I still question). My job had always been about managing the insurance risk that we kept on our own balance sheet. However, prior to getting into insurance, I was involved with transferring risk off balance sheet via securitization.

If you show any "quant" a stream of cashflows, their natural tendency is to want to securitize it.

If you show any "quant" a stream of cashflows, their natural tendency is to want to securitize it. I was no different. One of the first things I brought up at ING was securitization of life and health insurance premiums. I was told that it would be unlikely to fly because the market would see it as if we needed to raise capital. I saw it as smart risk management.

I never dropped the idea of securitization and discussed it with some investment banker friends and learned that securitization does happen in life insurance, but not as I envisioned it. Then, as part of a project at Coherent, I saw this new form of insurance securitization as a real solution to a particular problem our client was facing. I drew up some initial thoughts and shared it with the team shortly before spinning out Coherent Asia and forming Axia.

Securitization was an integral part of the DNA of Axia. We were building a brand new kind of greenfield digital insurance company from scratch with a beautiful new risk model that short-circuited the entire capital management value chain.

Our world-domination plan was to first build a greenfield digital insurance company from scratch (piece of cake!), build up our own balance sheet (piece of cake!), securitize that balance sheet becoming a wealth management company creating a new asset class in the process (piece of cake!) and ultimately taking that securitization machine to other insurers to transfer their risk to us as a new kind of digital reinsurer (piece of cake!).

Another sad thing about the untimely demise of Axia was that we were literally months away from going to market with a beautiful new highly customizable (down to the individual benefit) digital health product with a beautiful lifestyle based underwriting model not seen anywhere before. We were in the race to become the first virtual insurer in Hong Kong, but we also had operations in Thailand and Singapore. In Thailand, we were working with SCB Life who submitted our product to OIC for approval, but before that we had to do a workshop for their reinsurer, RGA, to get them comfortable with it. That was an eye opening experience for me. If an insurer wishes to launch an innovative new kind of product, they will often need buy-in from their reinsurer.

If an insurer wishes to launch an innovative new kind of product, they will often need buy-in from their reinsurer.

You don't hear much talk about innovation in reinsurance, yet reinsurance is critical to innovation in insurance. The long-term vision for CavalRe is to become the de facto digital reinsurer for innovative insurtechs.

But I am not fooling myself. That is not going to happen overnight, so on the way there, I want to up the insurer's game when it comes to understanding their own balance sheets.

I am still a believer in securitization / digital assets and think there are entire new asset classes that can be created by packaging up insurance risks of all kinds.

Taking my experience as a key member of both regional and local asset and liability committees, I'm building the tools I wish I had and the tools I will need to be able to manage a reinsurance balance sheet appropriately. That means straight-through processing of all assets and liabilities. When a premium is paid, reserves are calculated on the fly and everything flows straight to the balance sheet in real time. Same for claims, stock purchases, bond coupon payments, etc. The book value of equity starts looking like a stock ticker.

Insurers will be able to not only see, but project their balance sheets instantaneously allowing for real-time "what if" scenario analyses etc.

From the website:

We've all felt the pain. Innocuous ALCO action items launch teams of finance professionals scrambling for weeks to prepare for the next ALCO. The analysis is manual, non-repeatable, prone to error and the next ALCO kicks off a never ending cycle. It doesn't need to be like that.
CavalRe is a B2B cloud-native reinsurance technology and capital management solution provider offering insurance balance sheet intelligence never seen before. We are your insurance command center.

Imagine being able to walk into a meeting with an insurer and understand their balance sheet better than they do. I honestly believe I can achieve that with CavalRe based on pubicly available data. You might be surprised how poorly most insurers understand their own balance sheet despite having the data under their noses.

CavalRe will target consultants, investment banks, private equity, venture capital, insurers, reinsurers, etc. Anyone who wants to understand an insurance balance sheet.

At the end of the day, the capital management solution is intended to be a funnel to reinsurance. I envision a day where an insurer can open up my solution, look at their balance sheet, highlight a portion and click "Reinsurer with CavalRe" and it is done.

I'm on a crusade here. There is nothing that can stop me from achieving this vision. If you're interested in coming along for the ride, please reach out. The website has a chat feature I am manning myself personally and there is a fledgling discussion forum I'm thinking about calling "The ALCO" if you'd like to discuss reinsurance and capital management topics in the open. Obviously, do please connect with me here on LinkedIn as well.

It's time to call in the CavalRe!

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