Demex raises $10.25m as demand for parametric stop-loss reinsurance solution grows

Demex Group, a risk intelligence and analytics firm that facilitates stop-loss reinsurance coverage for climate and catastrophe risks, announced a $10.25 million funding round to help it respond to growing demand for its innovative products.

The $10.25 million was raised in a Series A funding round and a previously closed SAFE round led by Congruent Ventures with participation from Moxxie Ventures, MetaProp and existing investor Blue Bear Capital.

Last year, The Demex Group raised $5 million to bring to market its Retained Climate Risk Reinsurance (RCR Re) solution, which is focused on protection against severe convective storms (SCS) and other secondary hazards.

Demex’s core offering is a parametric reinsurance solution covering losses caused by severe convective storms, including tornadoes, thunderstorms, hail and wind.

As SCS risk coverage in the reinsurance market has declined and aggregate or lateral reinsurance limits have become less available, Demex’s product offering can fill a gap seen by many reinsurers.

Working with reinsurance brokers and reinsurance companies, Demex arranges parametric protection in the event of losses exceeding a specified threshold.

The company says this business model “is resonating with both customers and investors, with $65 million in reinsurance secured in the first sales season.”

“The mounting losses from these storms are a significant concern for the insurance industry – challenging annual earnings and balance sheet surpluses for insurance companies. We are grateful to the investors who bring climate perspective, technology capabilities, real estate focus and insurance experience to Demex,” said Bill Clark, President and CEO of Demex.

“Insurers have been suffering significant losses from frequent events like storms and have been profiting from excess for years,” added Abe Yokell, co-founder and managing partner of Congruent Ventures, who led the round. “Reinsurers have also been suffering higher-than-expected losses from secondary risks. The Demex model—developed by a team of blue-chip industry heavyweights—quantifies risk and reduces variances, which broadens reinsurance offerings and ultimately creates a stronger insurance industry for property owners.”

“The higher frequency of extreme weather events, such as severe convective storms, are now causing more damage than the catastrophic events that traditional reinsurance deals with,” said Hank Hattemer, chief operating officer of Blue Bear Capital. “Every Demex insurer client receives a reinsurance product that is precisely calibrated to how these weather events affect their business, fine-tuned based on their own data. No other reinsurance product that I know of works this way—it’s a fundamentally new product, and the market response has been overwhelmingly positive.”

Demex models loss accumulation using weather and claims data, incorporating climate research results, to determine the trigger parameters on which it bases its stop-loss reinsurance offering.

The company describes itself as “a market creator for a risk class that exceeds catastrophic losses,” adding that SCS risks threaten “not only insurers’ annual profits but also the stability of their businesses.”

Given that for many insurers the primary focus of year-end reinsurance renewals will be negotiating and securing broader coverage for the frequency risks they face, Demex’s parametric reinsurance solution is likely to see continued demand.