Demex Raises $5M to Bolster Its Stop-Loss Reinsurance Solutions for Secondary Perils

The Demex Group, the Washington, D.C.-based managing general agent (MGA) that offers stop-loss protection for secondary perils, announced it has raised $5 million from a syndicate of existing and new investors, led by Blue Bear Capital.

Blue Bear Capital, a venture and growth equity firm focused the world’s climate challenges, has been a major partner for Demex since 2021.

“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 CEO.

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“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,” Clark added.

“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 said, referring to the product Retained Climate Risk Reinsurance (RCR Re), which is now available.

There is a well-documented protection gap for SCS and other “secondary” weather perils, which include winter storms, heatwaves, cold snaps, droughts, and floods, the company said in a statement. Secondary perils are driving global insured losses that now accumulate to exceed losses generated by “primary” catastrophe perils such as hurricanes and earthquakes.

The increased frequency of secondary perils is directly affecting the balance sheets of insurance companies, Demex said, noting that secondary peril losses have accumulated to $1.1 trillion since 2000 and surpassed the $880 billion of losses caused by primary perils during the same period.

Demex explained that traditional reinsurance either excludes or drastically limits secondary peril coverage which causes insurers to self-insure multiples of losses than they have historically.

“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,” commented Hank Hattemer, COO of Blue Bear Capital.

“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,” Hattemer continued.

Founded in 2020, Demex operates at the intersection of climate, insurance, and technology, with a groundbreaking approach to weather risk transfer for secondary weather perils. In 2022, Demex created Retained Climate Risk Reinsurance (RCR Re), a stop-loss risk transfer product that settles based upon Demex’s proprietary Proxy Claims Index.

RCR Re enables insurance companies to affordably buy reinsurance for secondary peril risks that aggregate over time, Demex said. Demex enables insurance companies to transfer attritional climate risk by modeling, structuring, and settling the accumulation of small- and medium-sized claims caused by weather.

Photograph: This screenshot taken from a video shows a tornado on June 14, 2023, in Blakely, Ga. Officials from Texas to Georgia are reporting damaging winds and possible tornadoes as a powerful storm system crosses the South. (Rand McDonald via AP)

Topics Profit Loss Reinsurance Funding