Demex Group Secures US$10.25mn to Combat Storm Losses
The Demex Group, a risk analytics and intelligence company specialising in stop-loss reinsurance protection, has raised US$10.25mn in a Series A funding round led by Congruent Ventures. The investment, which includes a previously closed SAFE round, also saw participation from Moxxie Ventures, MetaProp, and existing investor Blue Bear Capital.
Demex's innovative parametric reinsurance solution targets losses from severe convective storms, including thunderstorms, hail, and wind events, which have become increasingly frequent due to climate change. The company's approach enables insurers to protect their financial security by arranging coverage for losses above a specified threshold, in partnership with reinsurance brokers and reinsurance companies.
The funding comes at a critical time for the insurance industry, which is grappling with growing losses from these high-frequency weather events. Bill Clark, President and CEO of Demex, highlights the significance of the investment: "Insurance carriers are taking significant losses from high-frequency events such as thunderstorms. We're grateful to have investors who bring climate perspective, technology capabilities, a property mindset, and insurance experience to Demex."
Demex's model has already gained traction in the market, with US$65 million of reinsurance bound in its first selling season. This early success underscores the pressing need for innovative solutions in the face of climate-related challenges.
Addressing the Reinsurance Gap
Traditional reinsurance products have typically focused on catastrophic events, leaving a gap in coverage for increasingly damaging high-frequency weather incidents. Hank Hattemer, Chief Operating Officer of Blue Bear Capital, explains: "Higher frequency extreme weather events, like severe convective storms, now cause more damage than the catastrophic events that are addressed by traditional reinsurance.
"Demex's approach stands out in the market due to its tailored solutions for each insurer. "Each Demex insurer customer gets a reinsurance product that is precisely calibrated to how those weather events affect its portfolio, tuned based on its own data," Hattemer adds. "No other reinsurance product that I'm aware of works like this – it is a fundamentally new product and the market response has been strong.
"The company's innovative model quantifies risk and reduces deviation, potentially broadening reinsurance offerings and strengthening the insurance industry for property owners. This approach is particularly crucial as reinsurers have experienced higher than expected losses due to secondary perils in recent years.
Insurtech Innovation in a Challenging Climate
Demex's successful funding round comes amid a challenging period for insurtech investments. While the sector saw a boom in recent years, with global insurtech funding reaching US$15.8bn in 2021, the market has cooled significantly.
However, Demex's focus on climate-related reinsurance solutions appears to have resonated with investors, bucking the trend of declining Series A rounds in the insurtech space. The company's ability to secure substantial funding underscores the growing recognition of climate change as a critical factor in the insurance industry's future.
The diverse group of investors participating in the funding round brings a range of expertise to Demex. Congruent Ventures, which led the round, is one of the largest early-stage investors in climate solutions, with over US$1bn in assets under management across early-stage climate tech funds. Blue Bear Capital specialises in high-growth technology companies across energy, infrastructure, and climate industries, while Moxxie Ventures and MetaProp bring additional tech and property sector insights.
Demex's approach to reinsurance aligns with broader industry trends towards data-driven, parametric solutions. The company leverages weather and claims data, informed by climate research, to model loss accumulation and provide parametric stop-loss solutions tailored to the needs of insurers and reinsurers. As climate change continues to reshape the risk landscape, innovative solutions like those offered by Demex are likely to play an increasingly important role in the insurance and reinsurance sectors. The company's success in attracting investment highlights the growing market demand for products that can effectively address the challenges posed by more frequent and severe weather events.
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