Illustration: Aïda Amer/Axios
"Parametric insurance" — two words lethal to just about any cocktail party conversation. But expect to hear more about this concept as climate change impacts worsen.
Why it matters: One major impact — rising waters and heavier precipitation in some regions — is already being felt and has spawned a niche insurance area that entrepreneurs and investors are building.
Driving the news: Floodbase, the Brooklyn company formerly known as Cloud to Street, this morning announced it raised a $12 million Series A for its flood monitoring service.
- There are plenty of wind gauges across the country, but far fewer flood monitoring systems.
- Floodbase contends that its combination of satellite data and ground-based sensors can enable insurance companies to begin introducing parametric flood policies.
Catch up fast: Parametric policies kick in when an event crosses a certain threshold — when, say, wind gusts reach a certain intensity — and pay out according to the magnitude of the weather event rather than the damages.
Details: Lowercarbon Capital led the round, which closed in September.
- Collaborative Fund, Floating Point and Vidavo participated. Floodbase says it hasn't taken on any debt.
- Its customers include the UN, NASA, USAID, the engineering giant Jacobs, and what Floodbase says are "some of the world's largest re-insurers."
State of play: A handful of startups are pursuing parametric plays.
- Raincoat, based in San Juan, Puerto Rico, makes modeling software for parametric insurance products. It raised $4.5 million in a seed round last August.
- Another company, Sensible, has introduced what it calls "weather insurance," effectively coverage for when a severe weather event disrupts anything from a vacation to a trip to the zoo.
Plus: FloodFlash, based in London, this fall became the first company to issue mass-market parametric flood insurance.
Context: Climate change has made historical weather data more unreliable. Meanwhile, the cost and capability of satellites, remote sensors and data analysis has vastly improved.
Be smart: Flooding is the most common weather hazard globally — but among the least covered by insurance.