The Demex Group – the creators of first-of-its-kind reinsurance solutions that address the accumulating losses caused by secondary perils – recently announced it has raised $5 million from a syndicate of existing and new investors led by Blue Bear Capital. Blue Bear Capital, a venture and growth equity firm focused on the world’s climate challenges, has been a significant partner for Demex since 2021.
There is a well-documented protection gap for SCS and other ‘secondary’ weather perils, including winter storms, heat waves, cold snaps, droughts, and floods. And secondary perils drive global insured losses that accumulate to exceed losses generated by ‘primary’ catastrophe perils such as hurricanes and earthquakes.
The increased frequency of secondary perils has directly impacted insurance companies’ balance sheets. And secondary peril losses have accumulated to $1.1 trillion since 2000, surpassing $880 billion of losses caused by primary perils during the same period. Traditional reinsurance either excludes or drastically limits secondary peril coverage, which causes insurers to self-insure multiples of losses than they have historically.
Launched in 2020, Demex operates at the intersection of climate, insurance, and technology, with a groundbreaking approach to weather risk transfer for secondary weather perils. And in 2022, Demex created Retained Climate Risk Reinsurance, which is a unique stop-loss risk transfer product that settles based upon Demex’s proprietary Proxy Claims Index. RCR Re enables insurance companies to affordably buy reinsurance for secondary peril risks that aggregate over time.
Demex models the accumulation of secondary peril claims caused by weather that traditional modeling technology—originally designed to address primary perils—cannot. Demex’s solutions present an exciting opportunity to close the growing secondary peril protection gap and increase global economic resilience to climate change.
RCR Re is available now and has become a key component of insurers’ reinsurance programs as they plan for 2024.
KEY QUOTES:
“This additional investment empowers us to deliver new weather risk transfer capabilities to insurance companies that are facing escalating losses due to the increased frequency of non-catastrophic weather events. Severe convective storms (SCS) cause accumulated losses in midwestern states that exceed hurricane losses in coastal states. SCS loss accumulation increasingly causes earnings unpredictability, credit rating downgrades, and even insolvency for insurance companies. Our reinsurance broker distribution partners and our risk capacity network are eager to address this risk and Demex RCR Re is the first purpose-built solution designed specifically for severe thunderstorms.”
— Bill Clark, Demex CEO
“Blue Bear is excited to lead this round for Demex given the unequivocal opportunity for Demex’s team and technology to provide a risk transfer solution that is calibrated to the weather-driven loss experience of insurers. Insured SCS losses are already near $40 Billion this year, underscoring insurers’ need for financial protection immediately. Demex RCR Reinsurance solution is the only mechanism in the market to reinsure SCS and other Secondary Peril losses.”
— Hank Hattemer, COO of Blue Bear Capital
