Demex, a technology-enabled reinsurance solution provider, has announced a new winter storm product, to protect primary carriers from losses caused by unexpected storms, cold temperatures, and heavier than usual snowfall.
Described as the first-of-its-type, this new reinsurance solution is based on Demex’s successful working-layer, aggregate reinsurance solution for severe convective storm losses.
While winter storms are frequently underestimated, it is a significant peril costing US insurers more than $7 billion between 2021 and 2025 according to Swiss Re.
These losses frequently fall directly on primary carriers, as they often remain outside the scope of traditional property catastrophe treaties.
Demex’s new winter storm product uses a carrier’s ground-up claims data from the past decade and overlays corresponding weather data to develop a sophisticated modeled loss index.
Reinsurers then offer cover based on the index to meet a carrier’s specific risk transfer needs.
By leveraging claims data specific to the cedent, Demex creates a highly precise projected loss model, an approach that contrasts to using general industry data sets or models based on broad damage studies.
Demex analysts have found that between 15% and 50% of storm-related losses often go unrecorded by third-party industry data sources, a gap that complicates risk pricing for reinsurers and primary carriers alike.
Claims payments for the Demex solution work in the same way as indemnity aggregate reinsurance. Once the total of modelled losses exceeds the reinsurance attachment point, funds are transferred directly from the reinsurer to the primary carrier.
Matt Coleman, President, Reinsurance at Demex, commented: “It may seem odd launching a winter storm product in summer, but as JFK said, ‘The time to repair the roof is when the sun is shining.’ We’ve been proactively exploring how to extend our secondary peril reinsurance cover.
“The scale of insured losses and explicit demand from primary carriers made winter storms a natural target. Having successfully developed and piloted the product, it is now available to all US carriers. Now is the time to protect your earnings and balance sheet from another harsh winter.”
According to Demex, its SCS reinsurance solution demonstrates that its products offer a lower rate on line than indemnity products (in the rare cases that indemnity aggregate reinsurance is available).
By using a modelled loss index that stabilises socio-economic factors while closely tracking indemnity losses, the product reduces uncertainty for reinsurers.
This approach, Demex noted, allows for cheaper, weather-based pricing for reinsurers and provides primary carriers with well tailored coverage.
