Demex launches Appraisals as pathway to parametric climate hedging

The Demex Group, a climate risk focused insurtech that aims to deliver climate-resilience through financial risk solutions on a global scale, has launched a new climate appraisal service that is designed to provide an assessment of climate-driven risk and provides an input to help companies hedge their climate exposure.

Climate Risk Appraisals from Demex are designed to “appraises climate-driven risk across an unlimited offering of financial instruments globally,” the company explained.

They are designed to be a robust starting point for any entities climate risk management journey, allowing asset owners, investors or asset holders, and management to better understand their potential exposure to climate related risks.

Services to assess and quantify the climate risk exposure that is embedded in portfolios and assets are going to be key to resilience building, in particular to furnishing entities with the understanding and data needed to help them enter into climate insurance, reinsurance and hedging or risk transfer arrangements.

It is only by being able to identify, analyse and quantify climate risk exposure and its potential impacts, that informed decisions related to hedging and risk transfer can be taken.

With many of these embedded climate risks currently unquantified and even unidentified in many cases, services like this can also be a precursor stimulant for the use of risk transfer where it has never been contemplated before.

Demex believes its new Climate Risk Appraisals can “form a pathway toward Demex derived parametric insurance and climate hedging for complete financial solutions.”

The insurtech calls this “a new management strategy for climate resilience” as the Appraisals can highlight exposures that can impact investment valuations, such as extreme rainfall, snowfall, wind, and temperature.

“Appraising climate risk is the first necessary step in forming strategies to manage financial climate risk,” explained Ed Byrns, CEO of Demex. “Appraisals are also required in order to form and deploy new mechanisms for financial recovery when extreme weather drives unexpected losses.”

Demex assesses and importantly also prices risks from extreme weather and climate, and its insights are tailored to specific capital investments and management strategies.

“With a clear picture of the dollar value of risk, clients promote profitability through informed strategic decisions,” including risk transfer or climate risk hedging.

Gaining robust insights into climate linked economics and how they can affect asset portfolios, physical and monetary with links, is critical to helping entities build resilience and also transfer climate risk exposure to moderate the potential financial impacts they could face.

Technology such as Demex’s offerings is going to be key in helping the insurance, reinsurance and insurance-linked securities (ILS) industries become increasingly useful as climate risk transfer providers and the absorbers of climate risk volatility for our financial markets and economies.

Demex says its Climate Risk Appraisals can help lenders appraise climate-driven shifts for the risk of borrower defaults, business owners to appraise climate-driven shifts in costs and revenue and investors to appraise climate-driven shifts in projected returns across their portfolios.

With these insights it is then possible to structure climate related hedges and risk transfer, in insurance, reinsurance or capital market form, to offset the impacts of these climate-driven shifts in value and risk.