The Demex Group, a climate risk focused insurtech that aims to deliver climate-resilience through financial risk solutions on a global scale, has partnered with Canopius owned MGA and insurance API platform Vave to offer parametric extreme temperature insurance to commercial property owners.
The Demex Group launched last year, securing $4.2 million of seed funding from leading financial services, fintech and insurtech focused venture investment groups, Anthemis and IA Capital.
The company has had a relationship with specialist insurance-linked securities (ILS) investment manager Nephila Capital, which supplied specific weather risk capacity to underpin products Demex created, while global reinsurance firm Munich Re has also been a risk capacity provider and provides operational support.
Demex has been building out its climate and weather analytics drive products over the last year, as well as its service that democratises access to climate data that is useful for risk transfer, insurance or reinsurance transactions.
In this newly announced partnership, Demex is working with Canopius’ algorithmic underwriting managing general agent and insurance API service platform Vave to deliver parametric extreme temperature insurance to commercial properties across the United States.
Vave’s extreme temperature insurance is powered by Demex and the product is structured so that it can provide up to $1,000 of immediate cash during intense temperature events.
The companies explained, “By embedding Demex technology within Vave’s new commercial offering, policy holders are seamlessly protected from the costs of extreme climate events. This embedded insurance model combines the climate risk analytic expertise of Demex and the data-driven insurance offerings of Vave into robust, climate resiliency insurance.”
Claims can be triggered based on temperature hitting a pre-defined extreme, in either low or freezing temperatures, or cases of extreme heat.
The timing is good, as in just the last year the United States has seen both extremes, from the polar vortex and Texas freeze event earlier in the year, to record high temperatures in some regions this summer.
The Texas freeze provided the ideal example of why this kind of parametric insurance can be useful, as so many commercial property owners and businesses did not have any coverage for the interruption of a significant freeze event.
Parametric insurance can cover those commercial and business interruption insurance gaps, providing liquidity to business owners when weather conditions would otherwise impact their ability to operate, their customer footfall, or make it hard for employees to get to premises.
Payouts are automated with this Vave parametric product that is powered by Demex and severity is taken into account, with higher payouts for more severe weather extremes.
Importantly, the parametric insurance policies are calibrated, based on hyper-local weather trends, which will help to reduce basis risk.
Extreme weather insurance integrates property-level weather in nearly 42,000 zip codes with underwriting algorithms, while the climate risk can therefore be estimated at every Vave policy in the United States.
“At Demex, we believe insurers will lead the way helping people manage the effects of climate change. We’re excited to launch this product because we see it as one of the first major steps to create climate resilience for policy holders,” explained Demex CEO Ed Byrns.
“The addition of Demex parametric weather cover to the Vave Commercial Property Product will give small businesses increased peace of mind that they can continue to operate following extreme weather. Our collaboration with Demex continues the Vave tradition of finding innovative ways to offer consumers enhanced coverage,” added Vave Head of Product Robert Porter.