Descartes in bid to disrupt corporate insurance

As climate change drives economic losses worldwide, Descartes is seeking to disrupt the insurance industry through a growing product offering which covers the full spectrum of natural catastrophes and emerging risk exposures. 

This is according to Tanguy Touffut, CEO and co-founder of Descartes Underwriting, speaking to StrategicRISK ahead of French risk management association Amrae’s annual meeting in Deuville.

Descartes’ parametric solutions leverage new data sources combined with AI, with the aim to drive transformation within an evolving risk landscape, and challenge traditional insurance models.

Cover for a changing climate

“A very visual example on how parametric solutions work is wildfires,” he explains. “Typically, if you insure a large pulp manufacturer - it could be in Chile, Australia, California or Oregon - you can capture all the plantations within less than ten metre resolution using satellite imagery combined with AI.”

“The images recognise the planted forests versus natural forests and distinguish rivers, roads and fields,” he continues. “And you can determine if trees on the plantation have burnt. You can even assess the salvage ratio, and do all this without having to send out 50 loss adjusters.”

The ability to assess losses quickly and remotely has never been more vital. In addition to the inevitable health and safety benefits, there is the added bonus of settling claims efficiently during a global pandemic when lockdown restrictions have also proven an issue.

Tech-driven covers and rapid payouts

Among the products set to launch in 2022 is a parametric solution for US tornado risk, a secondary peril which is getting more attention as climate change impacts the frequency and severity of severe convective storms.

”Descartes uses a combination of satellite imagery and physical land data to assess the exact trajectory, footprint and windspeeds of a tornado outburst in near-real time, allowing for an extremely quick and transparent payout to impacted corporations,” explains Touffut.. 

He notes that there is a vast and widening protection gap when it comes to losses from natural catastrophes and extreme weather.

According to Aon’s report on weather, climate and catastrophe losses during 2021, just 38% of the $343 billion in economic losses globally over the course of the year, was covered by insurance. 

”If you look at natural catastrophe losses over the past 20 years, the uninsured losses have grown a lot faster than insured losses, and we want to address that protection gap,” says Touffut.

”The insurance sector is not fit for purpose,” he continues. ”We need to improve our products and make sure they are more affordable.”

”In addition, the time between the notification of loss and end payment takes too long. In the USA it takes an average of 550 days between a catastrophe loss and claims payment - so there are plenty of things to address.” 

”With the support of our partners, we will continue to develop and deploy a new generation of insurance products that are entirely tech-driven, simpler, more transparent and quicker to pay in the event of a loss, adapted for the new risks corporations and governments increasingly face,” says Touffut.

Successful capital raise

With offices in Paris, New York, Sydney, Singapore and London, Descartes has bullish ambitions to disrupt the commercial insurance business. 

The insurtech has raised fresh capital of $120m to expand its parametric solutions for corporate clients and plans to open an office in Hong Kong in 2022.

Private equity firm Highland Europe led the raise alongside international investment company Eurazeo, with participation of existing investors Serena, Cathay Innovation and Blackfin Capital Partners and new entrants Seaya Ventures and Mundi Ventures.  

“The corporate insurance market is undergoing a momentous shift driven by a changing climate, the growing impact of natural catastrophes and a rise in emerging risks”, says Touffut.

“Our aim is to be the global leader in delivering truly revolutionary solutions to brokers, corporations and public entities for these evolving exposures.”