March 18, 2020

Protect Your Income from Winter Weather Variability

Insurance Solutions that are Client Calibrated for US domiciled entities

Carlos Oliveras, Head of Insurance

As our team engages with insurance companies, brokers, agents, and policyholders to build financial resilience for extreme winter weather, we get a common set of questions.  Our responses are provided here as an easy reference document.

What is The Demex Group and why are we unique?

Demex is a technology company operating at the intersection of climate, finance, and insurance. Over two years ago, we launched the first-ever platform for analyzing, pricing, and transferring climate-linked risks at scale. Since our inception, we’ve provided clients with a “shock absorber for climate change.”

After launching the infrastructure for our insurance and risk-transfer solutions, we’ve created and introduced several new policy forms to mitigate the impact of climate risk for our customers. Our insurance products focus on precipitation (snow and rain), temperature (heat and cold) and wind risk transfer solutions.

How can insurance be used to protect your snow removal revenue?

The frequency and intensity of extreme weather events are changing due to climate change. Past climate patterns are no longer the best sole indicator of future weather events.

New snowfall patterns have emerged in the United States. Many locations are experiencing strongly increasing or decreasing annual snowfall trends, in addition to greater variability.  The map below from the Demex Climate Center depicts the areas of the U.S. where strong decreasing trends are occurring.

United States locations with strongly decreasing snowfall trends.

Extreme snowfall can lead to dramatic fluctuations in revenue and operating costs for businesses. These impacts are highly localized to each property.

Demex works with partners in the insurance sector to build policies that protect against unwanted deviations from budget caused by extreme winter weather. We help organizations take control and build budget/income certainty.

Where does the data used by Demex come from?

Demex collects data from multiple public and private weather data sources. We continually update all data as new observations are available and passed through extensive quality control checks.

Weather data is a core strength of Demex, and central to our appraisal services and risk transfer products. We receive, review and upload 11 million global time-stamped weather data series daily to ensure analytic accuracy and the highest levels of customer service.

How is my information utilized?

We ask all clients for location and revenue information, and copies of the current year’s snow removal contracts. For snow removal revenue protection insurance, we first determine the best 40+-year weather data time series available and the corresponding weather station for each insured location. Then we calibrate this snowfall data to your revenue at each location to create customized parametric models for your portfolio. Each policy is designed exclusively for each client’s profile of properties.

Who is best suited for this type of coverage?

The Demex Snowfall Removal Revenue Protection Policy is best suited for snowfall removal contractors who obtain a large amount of their revenue from “fee for service” contracts. Simply stated, it’s beneficial for contractors that are paid a fee to remove/push snow only when it snows.

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 coverage 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, South Carolina, Vermont, Wisconsin, and Wyoming.

If your locations are outside of these areas, please check with your broker as we’re rapidly expanding our distribution territory.

What do I need to provide Demex if I want a quote?

All we require are historical revenue data and copies of your current year snow removal contracts. We then calibrate our model to your data to create customized risk solutions for you.

How long does the underwriting process take?

Customer service is a critical component of our business. After obtaining all required information, we typically communicate the results of our analysis and the limit options available within a week.

How will my submission be underwritten, and my premium calculated?

This is a parametric insurance product and is available on a Surplus Lines basis through your insurance broker.

Demex models your expected revenue using the revenue data and current-year contracts provided during the application process. We then overlay the most recent 40 years of weather data to develop customized cashflows that model historic storms and the total snowfall each year. This process is repeated for each of your snow removal locations at the physical address. Key outputs include modeled revenue for:

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

The output demonstrates several premium scenarios based on various deductibles and coverage limit options. Demex works to customize and structure solutions that meet individual customer requirements. We collaborate to identify the policy details (premium, limit, and deductible) that best meet client needs.

What is a parametric policy and how does it differ from standard policies?

In traditional commercial insurance, the policyholder pays a premium in return for a promise from the insurer to indemnify them for actual losses incurred from an incident or a named peril. Claims are paid only after the loss is investigated and adjusted, which may result in a lengthy process.

In contrast, parametric policies are generally binary. The coverage is based on an objective policy triggering event that occurs by chance but can be modeled and is tied to an impartial parameter or index agreed upon before the policy is purchased. Once the trigger occurs, the pay-out procedure begins for the policyholder.

Parametric covers are intended to complement traditional insurance and speed up the payment/recovery process.

Why should I purchase parametric insurance?

Traditional insurance programs typically provide coverage for property damage and liability. These policies do not generally offer coverage that protects a policyholder’s revenue from the impact of extreme winter weather events. As a result, decreased 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.

How are my recoveries calculated and processed?

Claims and recoveries are calculated parametrically, meaning that recovery amounts are based on the weather data that is reported at the weather station selected for each insured snow removal location. The modeled revenue outputs of Alpha, Beta, and Gamma form the basis of this calculation, considering both the number of snowfall events and the total seasonal snowfall.

Using our state-of-the-art technology, Demex tracks all policy triggers and limits across the full geography of the portfolio in real-time. At the end of the winter season, or otherwise agreed in the policy, if your modeled cash flow hits the specific policy trigger, the claims process automatically begins. We will notify you if your policy trigger has been exceeded and you are eligible for a recovery.

A customer must simply confirm that they qualify for this recovery based on their revenue shortfall to have a payment furnished by the insurer. This process typically takes no more than 2 to 4 weeks.

How else can I leverage my relationship with Demex?

In addition to our unmatched climate-impact appraisal services, we also offer parametric insurance policies that protect property owners and facility managers income from the variability of snow removal costs caused by winter weather extremes. We are also working with partners to develop policies for rain, extreme heat, and extreme cold.

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

How do I find out more?

We operate as a broker market. Even if you contact us directly, we will provide our products only through a licensed Broker. If you or your broker have additional questions we can be reached as follows:

Or – book an appointment to chat with us!