The Demex Group, the technology company behind a first-of-its-kind platform for analyzing, pricing, and transferring climate-linked risks at scale, finds widening insurance gaps that are linked to climate change.
A recent NOAA report highlights 20 extreme weather events in 2021 causing $145-Billion in total economic loss. NOAA shows that 2021 was the third costliest year since 1980 and that losses have been rising over the decades.
Hurricane Ida was the first event to cost more than $25-Billion since the Western Wildfires in the summer and fall of 2018, both of which can be referred to as “cats” (major catastrophes.) These major Cats occur every few years and they lead to losses throughout our financial system. Losses spread across many insurers, reinsurers, and other financial firms meaning that dollars for recovery are widespread.
“Kits” are smaller catastrophes that occur far more often. In 2021 alone, there were 19 events costing between $1-Billion and $25-Billion per event and 15 of those were between $1-Billion and $2-Billion each. Losses from these events don’t reach as far across the financial system and instead focus impact on individuals and businesses.
Insurance and reinsurance have long provided financial recovery following Cats but there is an expanding gap when it comes to the Kits which are more common and less severe. Kit losses mount up to cause cumulative losses at insurance companies that don’t trigger reinsurance, sometimes leading to solvency issues. In many cases, Kit losses are simply not insured. This puts property owners, tenants, and businesses in the crosshairs for increasing losses that are not reimbursed by their insurance.
Insurance brokerage and risk management behemoth, Aon, recently said that global economic losses from natural catastrophes reached $343-Billion in 2021. Still, only $130-Billion of the total was covered by insurance and reinsurance. That $213-Billion gap is a market opportunity and a much-needed zone for financial resilience.
“Our team at Demex is innovating in this gap. Our products focus on financial climate resilience for the Kits. We develop specialized coverage for insurers and reinsurers that helps them recover and provides new lines of business,” stated Ed Burns, CEO of The Demex Group. “We are also enabling insurers to provide new lines of coverage, known as parametric insurance, that covers business owners and property owners. Insurers that provide ‘Kit claims’ can now offset losses that would have typically fallen outside of traditional coverage.”
Learn more in this article Insurance Gaps in Climate Resilience.
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