March 08, 2022

Case Study: Extreme Weather Insurance

Insurance creates financial climate resilience

Dan Yokoyama, SVP of Growth

Heavy rainfall, snowfall, and extreme temperatures lead to unexpected out-of-pocket costs and lost revenue for city planners, individual businesses, homeowners, and renters. Traditional insurance strategies are shifting to meet this need.

Demex has developed new insurance options to protect policyholders following extreme weather. These solutions are parametric, meaning that claims and payments are automatically generated, making the process transparent and hassle-free. For a reasonable upfront premium, policyholders can rest easy because they know a claim will pay to offset expenses when bad weather strikes.

Demex technology also directly integrates with insurance carriers who are developing and deploying new weather insurance. We power policies that reflect hyper-local weather patterns. We partner with customers to model and price premium for each risk at each location. We equip them to underwrite the growing extreme weather risks for their policyholders.

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A New Normal: Extreme Weather

Climate change is causing more weather extremes. In 2021, the United States experienced 20 individual weather disasters costing over one billion dollars each, and the Washington Post found that over 40 percent of Americans lived in a county impacted by extreme weather.

Until now, traditional insurance indemnity policies have been unequipped to provide requisite protection following many of these events.

“The number and cost of weather and climate disasters are increasing in the United States due to a combination of increased exposure (i.e., more assets at risk), vulnerability (i.e., how much damage a hazard of given intensity—wind speed, or flood depth, for example—causes at a location), and the fact that climate change is increasing the frequency of some types of extremes that lead to billion-dollar disasters.” from NOAA, Increasing trend of high-cost disasters: exposure, vulnerability and climate change influence on extremes

Shifting Risks for Homeowners and Businesses

As the extreme temperature events of 2021 demonstrated, homeowners and businesses experience higher utility bills, operating costs, and other unforeseen effects in extreme events.

Insurers and reinsurers have typically offered protection, known as “catastrophe insurance,” for the most severe events, like hurricanes. Property owners, tenants, and businesses are, however, increasingly in the crosshairs for costs that are not reimbursed by their insurance.

“People wait in a long line to buy groceries at H-E-B on South Congress Avenue in Austin during an extreme cold snap and widespread power outage on Tuesday.” Source:

Demex Solutions

Demex extreme weather coverage boosts your resilience to these unplanned risks.

These solutions are parametric, meaning that claims are easily triggered and settled. When the weather hits a certain pre-agreed threshold, the policy kicks in, hassle-free.

We also provide direct integration for insurance carriers developing new weather insurance. Demex technology enables localized policies that reflect hyper-local weather patterns. We partner with customers to model and price each risk for underwriting the growing extreme weather risks for their policyholders.

Policies are calibrated, based on hyper-local weather trends. Payment is automatically generated, without the need for a time-consuming adjustment process. The claim amount usually corresponds to the severity of the event. More extreme events drive larger losses and lead to higher claim payments.

Demex currently offers embedded extreme temperature coverage as well as two snowfall insurance products:

  • Demex Revenue Protection Insurance was created for snow removal contractors and snow-dependent businesses. Claims are triggered when snowfall revenue is low.
  • Demex Cost Control Insurance serves property owners, facility managers, and municipalities. Claims are triggered when snowfall expenses are high.

Example: Embedded Extreme Temperature Coverage

Demex partnered with Vave, an algorithmic underwriting managing general agent and insurance API service platform, to deliver extreme temperature insurance to commercial properties across the United States.

Vave’s extreme temperature insurance is powered by Demex and designed to provide up to $1,500 of cash during intense temperature events. By embedding Demex technology within Vave’s new commercial offering, policyholders are seamlessly protected from the costs of extreme climate events.

Extreme weather insurance integrates property-level weather in nearly 42,000 zip codes with underwriting algorithms and estimates the climate risks at every Vave policy in the United States. 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.

Extreme temperature coverage is parametric, and claims are directly linked to temperature. When the temperature passes a predefined threshold – for example, below 20°F in winter – a claim is immediately triggered.

The map above shows hypothetical insurance claims in February of 2021.

In 2020, residents of Houston, Texas would have automatically received the maximum payout of the policy, providing relief in the face of extreme cold.

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