September 15, 2021

Defending Your Budget from Winter Weather

Insurance Solutions that are Client Calibrated

Carlos A Oliveras, Head of Insurance

As my team has been working with insurance companies, brokers, agents, and policy-holders to build financial resilience to extreme winter weather, we are getting a number of questions that arise again and again. We wanted to devote some time to sharing these, as well as our responses to them.

What is The Demex Group and what makes us unique?

Demex has launched a first-of-its-kind platform for analyzing, pricing, and transferring climate-linked risks at scale. We are a technology company operating at the intersection of climate, finance, and insurance. Since our inception, we’ve provided our clients with a  “shock absorber for climate change” and we recently launched the infrastructure for insurance-based solutions.

How can insurance cost controls protect your snow removal budget?

It is no secret that the frequency and intensity of extreme weather events are changing. Extreme weather leads to dramatic fluctuations in revenue and operating costs for businesses around the world. These impacts are highly localized to each property, individualized for each occupant, and becoming more impactful than natural catastrophes. Past climate patterns are no longer prologue for future weather events.

Climate change is driving changes in snowfall patterns. Many locations are seeing upward snowfall trends from year to year along with increasing variability.  The map below from the Demex Climate Center shows areas of the U.S. with much snowier and far more variable winters from year to year.

Demex is working with partners in the insurance sector to build policies that protect against unwanted deviations from budget when winter weather is extreme. We help organizations take control and build budget certainty.

Where does the data used by Demex come from, and how is it utilized to structure insurance policies?

Demex collects data from multiple public and private weather data sources. We continually update all data as new observations are available, and it is then passed through extensive quality control checks. To date, Demex has collected over 6 million global weather time series.

For snow removal insurance, we use snow observations localized to individual zip codes. This data is calibrated to a policy holder’s expenses and we create a custom parametric model for underwriting. Each policy is designed exclusively for each client’s profile of properties.

Why should I sell parametric insurance and why is it the best solution for buyers?

Traditional insurance programs typically provide coverage for property damage. These policies do not generally cover the increased operating expenses or lost revenue incurred during a typical winter storm. As a result, lost profitability stemming from the changing nature of winter weather patterns is frequently self-insured.

We’re pioneering new and flexible coverage. Parametric insurance is the best way to protect against these risks. This is a new, exciting, opportunity for insurance carriers to protect the variable cash flows linked to operational surprises during extreme winter weather.

Who is best suited for this type of coverage?

Where is this coverage available?

Demex is currently working with our partners in the following 21 jurisdictions and our coverage footprint is growing all the time! Our current state distribution includes: Alabama, Connecticut, D.C., Delaware, Illinois, Massachusetts, Maine, Michigan, Minnesota, New Hampshire, North Carolina, North Dakota, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Wisconsin, and Wyoming.

What do I need to get started?

We ask policy-holders to provide as much historical budget information as they have available. Underwriting guidelines require a minimum of five years of budget data. More data allows greater customization.

How does it work?

This parametric insurance product is offered on a Surplus Lines basis using a broker and wholesaler distribution network. Demex superimposes the most recent 40 years of weather data and develops customized cashflows that model historic storms and the total snowfall each year. This process is repeated for every location in a customer’s portfolio at the street-address level. Key outputs include modeled expenses for:

  • Alpha: per snowfall event per property
  • Beta: per inch/centimeter of snowfall per property
  • Gamma: per season per property

The output demonstrates various premium scenarios based on various deductibles and various levels of the total limit.

Demex works to customize and structure solutions that meet individual customer requirements. We find, however, that most buyers tend to select a policy limit based on one of the following:

  • a fixed amount over historical budgeted costs
  • limit needed to cover costs at an 80th or 90th percentile of total historical snowfall
  • limit needed to cover costs at 80th or 90th percentile of largest total snowfall year

We work to identify the policy details (premium, limit, and deductible) that best meet client needs. Our underwriting process also allows us to consider pools, and we can issue master policies and certificates, individual policies, etc, to meet your distribution needs.

How long does underwriting take?

We typically communicate the results of our analysis within a week (or less).

Then what?

Demex provides all customer and policy lifecycle services. We focus on customer service as our top priority! We are at the forefront of technological innovation in this space and remain committed to create and implement the best available technology in the industry.

How are Claims handled?

It’s simple. Using our state-of-the-art technology, Demex tracks all policy triggers and limits across the full geography of the portfolio. At the end of the winter season, if your modeled cash flow hits the specific policy trigger, recovery is automatically processed.

What else does Demex do?

The Demex Solutions Center tracks all of your Buyer’s bound policies in real-time. Brokers can observe modeled cashflows and use this information to engage their clients’ risk management conversations and consult throughout the season.

We are developing parametric insurance policies for rain, extreme heat, and extreme cold.

How do I find out more?

Or – book an appointment to chat with us!