Demex raises $5m to bring SCS reinsurance solution to market

Climate risk insurtech The Demex Group has raised $5 million from a syndicate of new and existing investors to deliver its severe convective storm (SCS) and other secondary peril focused solution, Retained Climate Risk Reinsurance (RCR Re), to market.

After securing $4.2 million in seed funding in 2020, Demex raised a further $9 million at the end of 2021 in a Series A funding round led by financial services and technology investors Anthemis Group, Blue Bear Capital, and QBE Ventures.

Today, the insurtech, which aims to deliver climate-resilience through financial risk solutions, has announced the successful raising of an additional $5 million from investors, led by one of its major partners, Blue Bear Capital.

The new funds will support the delivery of the Demex RCR Reinsurance solution, a purpose-built mechanism designed specifically for severe thunderstorms, which as we’ve reported, is a peril that’s increasingly contributing to global insurance and reinsurance industry losses.

“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,” said Bill Clark, Demex Chief Executive Officer (CEO).

“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,” he added.

This year, there’s been a record number of multi-billion dollar SCS events in the US, with total industry losses from the peril already approaching a huge $40 billion.

According to Demex, secondary peril losses, which also include things like drought, wildfires, and floods, have accumulated to $1.1 trillion since 2000 and exceeded $880 billion of insured losses driven by primary perils over the same period.

Hank Hattemer, Chief Operating Officer (COO) of Blue Bear Capital, commented, “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.”

The RCR Re solution was created by the insurtech last year, and is structured as a stop loss risk transfer product that settles based on the company’s proprietary Proxy Claims Index.

Demex says that it enables insurers to “affordably buy reinsurance for secondary peril risks that aggregate over time.”

The new reinsurance solution is available now and according to Demex, is becoming a key component of reinsurance programs as insurers plan for 2024.