From Honeymoon Hurricane to Head of Reinsurance

Isaac Espinoza joined from Grand Cayman, where he hadn’t left the island in 14 months because of strict COVID quarantine rules. He ended up there because of a hurricane. On his 2006 honeymoon, booked without thinking about hurricane season, a storm headed for Cayman on the wedding night and hooked north the next morning. He and his wife flew in the following day to an empty island, with the beach to themselves, liked it enough to consider moving, and less than a year later both had jobs there. He joined a startup reinsurance company, Greenlight Re. Fourteen years later, they are still there.

About Isaac Espinoza

Isaac Espinoza is Head of Reinsurance at Root Insurance, the Columbus, Ohio-based car insurer that went public on the Nasdaq on October 28, 2020.

What Reinsurance Is

Isaac explained reinsurance as insurance for insurance companies. An insurer concentrated in one area, such as a Florida homeowners writer, can have a great year if the wind doesn’t blow and a catastrophic one if it does, so it buys reinsurance from a global reinsurer that spreads the risk across Japan, Florida, Australia and Europe. Reinsurers are also a nimble form of capital, which is why they are so important to fast-growing insurtechs: they can support growth with capacity or protect against volatile events.

His role at Root is on the buyer side, the ceding company. The better Root performs, the easier it is to find reinsurance, because reinsurers want stability and profitability. More than ten reinsurers back Root, and part of why he was hired was to add sophistication to the program as the company grows.

What Makes Root Different

Root describes itself as the first mobile-first digital carrier. Phones come with a gyroscope, an accelerometer and GPS, which together show how someone drives. Isaac pointed to two differences from other usage-based insurers: Root is a full-stack carrier that owns its operations, and all of its telematics technology is built in-house, with no third-party analysis. Because everyone Root writes uses telematics, it can build it into the rating model from the ground up rather than layering it on at the end of the calculation.

COVID and Fairer Discounts

COVID helped Root’s model in some ways. People moved to online purchasing, and with less driving, they wanted discounts. Many carriers gave blanket discounts of 10 to 20 percent because they couldn’t tell who drove less. Root made its discount a function of how much each customer reduced driving, provided they kept their phone on. Those who cut driving most earned more, and those who didn’t earned none, which Isaac described as one of the fairest ways to handle it.

Dropping Credit Score by 2025

Root pledged to remove credit score from its rating by 2025. Isaac gave the history: credit began to be used in the 1990s, with Progressive among the first, and it was predictive. Root’s view is that certain groups are unfairly affected: people who pay in cash and have no history, younger people, and people whose medical catastrophe led to bankruptcy. Credit is a proxy for responsible behavior, and Root’s question is why use a proxy when you can use the behavior itself through telematics. Three states (Massachusetts, Hawaii and California) already bar it, and Isaac mentioned Washington announcing a ban shortly before the recording. Root also avoids variables correlated with income, such as education or occupation. The change will take time because credit is embedded in the models.

From Actuary to Underwriter to Venture Investor

At Greenlight Re, Isaac started as an analyst and recently qualified actuary working on pricing and reserving, then became an underwriter across property catastrophe, professional lines, mortgage reinsurance and accident and health. A few years before the recording he moved into a new innovation unit, Greenlight Re Innovations, which was effectively corporate venture capital, though the team preferred to call it a strategic investment unit.

Some people doubted that underwriters and actuaries could do VC, but he found the skills transfer: you underwrite the management team, evaluate the market and structure the deal, and instead of putting capacity down you put equity down. The sweet spot was seed stage, where the unit could add actuarial, underwriting, claims and finance support and even reinsurance capacity, and many portfolio companies were MGAs. It spoke to a few hundred startups and made 12 investments. He didn’t expect to leave that role, but Root was a chance to join an insurtech at a later stage, and having been the reinsurer helps him know what reinsurers want to see.

Lessons on Reinsurance Relationships

Isaac’s advice: reinsurers don’t like surprises. Be transparent, share significant data, and update them regularly, such as quarterly, not at the start of a treaty and then a year later. He also wished he could meet every reinsurance partner in person, as relationships carry you through difficult periods, and urged people to network, including on LinkedIn, webinars and podcasts.

SPACs, IPOs and the Insurtech Criticism

On the wave of insurtech listings, he noted that Lemonade and Root went public through traditional IPOs the year before, followed by several SPAC deals, and acquisitions such as American Family buying Bold Penguin. There is a lot of capital coming, and it’s not yet clear who the winners will be.

The main criticism, he said, is that insurtechs run higher loss, expense and combined ratios, and trade at higher price-to-book multiples than incumbents. His response was an Amazon analogy: it started with books, and few predicted AWS or its logistics business. Companies built for growth and scale are best positioned to move into new products and markets, and critics who treat the auto market as static ignore autonomous vehicles and mobility as a service.

What a Successful Startup Needs

He doesn’t believe in a single formula, but a good combination of insurance and tech expertise matters, and rarely in the same person. Root’s CEO, Alex Timm, grew up around his father’s insurance company and always wanted to be in the industry, and brought in tech experts from Silicon Valley, aviation and finance who are smart and willing to learn insurance. The key is that veterans with an open mind and outsiders with fresh ideas have an equal voice, because insurance has done a poor job of making itself attractive to talent.

Advice: Blinkist

For his recommendation, Isaac isn’t much of a book reader and uses Blinkist, which summarizes books in about 15 minutes each, letting him get through four in an hour in the evening, ideal for someone focused on time management.

Key Takeaways

• Reinsurance is insurance for insurers: it protects against concentration and severe events and acts as nimble growth capital, which is why reinsurers are central to insurtech.
• Root, a full-stack carrier with in-house telematics, uses it throughout its rating, and supports more than ten reinsurers.
• During COVID, Root tied discounts to measured reduction in driving rather than offering blanket cuts.
• Root pledged to remove credit score from its rating by 2025, arguing behavior is better than a proxy, with Massachusetts, Hawaii and California already barring it.
• Underwriting skills transfer to venture investing: you underwrite the team, market and deal; Greenlight Re Innovations made 12 seed-stage investments.
• Reinsurers hate surprises; regular, transparent reporting builds trust.
• Insurtech’s critics focus on loss and combined ratios; Isaac argues growth and scale are what matter over time.