In the fall of 2023, Jordan Montgomery led the Texas Rangers to their first World Series victory in franchise history. The 31-year-old left-hander had a year where he set career highs in wins (10), ERA (3.20) and strikeouts (166), posting a 3-1 record with a 2.90 ERA in the postseason. , payday for long-term free agents. When that didn’t happen, he was signed by the Arizona Diamondbacks to a one-year, $25 million contract just two days before Opening Day.
According to Baseball Reference, Montgomery struggled mightily in his new field, posting a 6.23 ERA and being worth -1.4 wins compared to his replacement in 2024. Diamondbacks owner Ken Kendrick took responsibility for the deal, calling it a “terrible decision.” Still, Arizona was forced to pay Montgomery’s full salary.
John Abbamondi launches Longball Capital & Insurance Services with Shiraz Rehman and is gearing up for a big offseason in baseball. Provided by: LongBall Capital Inc.
But a new insurance company created by a former longtime sports executive could help teams reduce the risks associated with highly paid players. If the Diamondbacks had such an agreement with Montgomery, they would only pay him about half of his money in 2024.
All of this was announced in 2023 by John Abbamondi, former CEO of the Brooklyn Nets and previously assistant general manager of the St. Louis Cardinals, and Shiraz Rehman, formerly assistant GM of the Nets. It is part of a new company co-founded in February. Chicago Cubs and Texas Rangers. The company LongBall Capital & Insurance Services has a licensed insurance agency known as LongBall Insurance Services LLC, and its holding company is known as LongBall Capital Inc.
Longball raised $4 million in funding in August 2023, mostly from institutional investors and wealthy individuals working on Wall Street and sports. The company is affiliated with United Specialty Insurance Company, a subsidiary of publicly traded insurance conglomerate Markel. United Specialty holds an ‘A’ rating from AM Best, which indicates that the company has an excellent ability to meet its insurance obligations. LongBall owns the product and United Specialty outsources pricing and sourcing to LongBall. Therefore, once a team enters into a policy, United Specialty will make payments to the team.
By this May, Abbamondi and Rehman had amassed enough capital to launch their first product, Disability+, at scale.
“Baseball player earnings this year will total about $5 billion, and because player contracts are guaranteed, all of that risk is on the club, not the player,” Abbamondi said. “And what we want to say to club owners is that you have to work around everything else in life. Even hedge your team’s revenue because you have a long-term naming rights deal. But the most important cost is assuming all the risk. So wouldn’t it make sense to transfer or share some of that risk with a third party?”
Traditionally, insurance policies for players who sign large endorsement deals have only covered long-term injuries, such as torn ACLs. In baseball, teams often have a 60- to 90-day deductible before recouping their funds. It is only after that period that teams can begin receiving a percentage of a player’s salary on a daily basis.
However, Disability+ can be a result of playing through an injury, returning from an injury, dealing with mental health issues, fatigue, decreased skill, or simply having a bad year for unknown reasons. It also covers players whose performance has decreased.
“My partner and I both worked in baseball and worked in the NBA, and we purchased these insurance policies,” Abbamondi said. “And frankly, we always thought they weren’t a good hedge against what we really cared about. And the products we wanted to buy just didn’t exist.
“What we claim the club gets from us does not count the days on the injured list. The claim the club receives from us is based entirely on how well the player performs. .”
Charges under the variable pricing model are based on a player’s Replays or More Runs (RAR). This is a metric similar to Wins Above Replays (WAR). Teams will be provided with their own metric formula so they understand how it works and a timeline showing the claims for each level of RAR. By adopting a numbers-based policy, Longball could settle the claim within days of the end of the season.
Basically, if a player honors his contract, the team will pay him a premium on top of his guaranteed salary. However, if a player performs poorly, the team can get back some of the money owed.
The premium is determined by the maximum claim amount and the player’s risk profile assessment. Sam Elias, a data scientist who worked on baseball analytics for the Los Angeles Dodgers, said the long ball is critical to the ability to take on risk. Elias develops models to predict player performance and is responsible for pricing the risk if a player’s performance falls below a certain threshold.
The Diamondbacks had no choice but to pay Jordan Montgomery in full on his $25 million contract despite a disastrous 6.23 ERA season.
It took about a year to build the product. This includes obtaining licenses, obtaining insurance funding and capacity from companies, and testing the product before it goes to market. Conversations were held with several key stakeholders, including MLB teams, the Commissioner’s Office, players, and their agents. The player policy the Cubs used served as a proof of concept.
Chicago Cubs GM Jed Hoyer, who has known Abbamondi for many years, announced a disability+ policy for unspecified players along with Long Ball in 2023 (players were informed of the policy), and will continue to do so in the future. He said he intended to sign a contract with them.
“Traditional insurance is based on injuries, usually catastrophic injuries, but this product is based on how the player can perform on the field,” Hoyer said. “And I think that makes a lot more sense given what we’re trying to do.”
If Arizona State had been able to implement a long-ball policy against Montgomery, they could have charged up to $15 million. Typically, for a free agent like Montgomery, the maximum bill is equal to 60% of the average annual contract value.
After deducting Montgomery’s $25 million guaranteed salary and $2.7 million in insurance premiums, the Diamondbacks will receive a total of $12.7 million.
If Montgomery had had a good season, Longball would have been paid $25 million in guaranteed salary and $2.7 million in insurance for a total of $27.7 million while representing United Specialty.
The team’s chief financial officer will be responsible for explaining how these different scenarios are factored into the team’s overall payroll budget each year.
Abbamondi said he plans to start selling insurance in the offseason.
“The way we think about it, it’s a real win-win in sport, the players get what they want, the clubs get the risk reduction, which is very helpful, and the fans get what they want. From a point of view, it increases the chances that our favorite players will come to our city or stay there,” Abbamondi said.
Abbamondi said team presidents at small-market clubs have cited the benefits of risk-mitigating insurance on big deals that can help retain star players.
“He said, ‘Look, the problem for a club like ours is, if the deal goes well, great.’ He’ll pay for it himself. But if it doesn’t work out, “A big contract can cripple a small club for 10 years,” Abbamondi said. “We don’t factor in that downside for them.”
Prince Fielder, currently a senior advisor at Longball, will provide a test case. He was drafted seventh overall by Milwaukee in 2002 and made the All-Star team three times with the Brewers before leaving the Detroit Tigers before the 2011 season when he signed a nine-year contract worth $214 million. did.
“If this had happened (while I was playing), I think I probably would have had a better chance of staying in Milwaukee, but I don’t know,” Fielder said. “But I don’t think it would have been a problem if this had happened.”
MLB declined to comment on the policy.
One potential concern that may arise is the optics. Example: If a player had a bad first half and had a bad RAR, would the team limit his playing time because he didn’t play well? Or would there be an insurance policy and a partial payment? Is it because you want to receive it?
The Disability+ policy does not exist beyond what was done for the Cubs and is now expired. MLB will not actively approve these types of insurance policies, but will evaluate them on a case-by-case basis. However, the league does not allow products based on team performance.
Abbamondi hopes to eventually expand into other major professional sports in North America, as well as world soccer.
Former MLB outfielder Chris Dickerson also serves as a senior long ball advisor. Previously, he was a member of the MLB Players Association Board of Directors. In his current role, he has spoken to dozens of players to get their opinions. “Their feedback has been broadly positive, which is why I’m here,” Dickerson said. Dickerson asked the players if it was okay to insure them. The players went into it because their contracts remain guaranteed and the team could potentially add help at the trade deadline with the money saved by the policy.
For Abbamondi, this is the latest step in his expansive career.
“I flew for 10 years in the Navy and worked in professional sports for 20 years. And my wife teases me that I went from ‘Top Gun’ to ‘Moneyball’ to an insurance agent,” he said. spoke.
