Member Spotlight: Descartes Underwriting
Henry: Can you introduce Descartes Underwriting?
Alessandro: Descartes Underwriting is an MGA specialised in parametric insurance solutions covering natural perils for over 200 corporate clients, including many Fortune 500 companies and governments. The company was founded in 2018 to take on a different approach in insurance, in the wake of climate change. Since then, we have grown to more than 60 people across our global hubs. Descartes is headquartered in Paris with offices in London, New York, Houston, Denver, Singapore and Sydney – with more coming soon as we continue to expand worldwide.
Henry: What are your roles and what do they involve?
Alessandro: I joined Descartes in 2019, and since November 2021 I have been Underwriting Manager, overseeing the London International Market. My role involves talking to brokers in the London Market to generate requests, discuss inquiries, structure policies and underwrite them. With a team of data scientists and underwriters developing Descartes’ proprietary risk models, we have the agility and flexibility to quote a bespoke cover within a few days.
Paul: As Business Development Director, I lead business development in the UK and Ireland and assess the future needs of the market, such as discussing with brokers opportunities for parametric coverage beyond natural perils. I have worked in underwriting and distribution in the insurance industry for over 20 years, including with Descartes’ co-founders Tanguy Touffut and Sébastien Piguet at AXA in 2015.
Henry: How do you define parametric insurance?
Alessandro: Parametric insurance is a new set of solutions for clients to manage their risks. The contracts are transparent and based upon predefined conditions (“triggers”). When those conditions are met, pay-outs can occur within a few days. As a concept, it has existed for several years, but developments in technology have powered its growth in recent years.
Henry: What types of coverage is Descartes seeing the most interest in?
Paul: Parametric insurance can cover certain risks in ways that indemnity insurance cannot, particularly for financial losses caused by natural catastrophes and weather perils. These risks include loss of attraction (when a business’ footfall drops after a catastrophe event even if it sustains no physical damage), widespread area damage (when many businesses in an area experience disruption after an event) and denial of access (when authorities shut down a building or area).
Alessandro: Many businesses struggle to find coverage for those non-damage business interruption risks and are unsatisfied with the exclusions in indemnity insurance contracts. Parametric provides a more transparent solution.
Henry: Why do your clients choose parametric insurance over traditional, indemnity-based insurance?
Paul: The most compelling reason for corporates to consider parametric as part of their insurance programme is the speed of payment, which provides liquidity. Some recent large losses in commercial property have taken three or four years to be settled; parametric insurance responds more quickly. Parametric does not solve every challenge of insurance coverage; both parametric and indemnity insurance have a role to play.
Henry: What parametric products do your UK and Irish clients need most?
Paul: Flood and temperature coverages are the main challenges which parametric insurance can address for UK and Irish domestic clients. Descartes also structures products which cover natural perils elsewhere in the world for UK- and Irish-domiciled clients with assets overseas.
Henry: How does Descartes engage with the London Insurance Market?
Paul: Many clients come to Lloyd’s and the London Market for risks that are difficult to place. Parametric insurance can provide an alternative solution as traditional catastrophe insurance solutions are becoming harder to find. The opening of our London office has had a warm welcome in the London Market and we have seen significant interest from brokers.
Alessandro: The London Market has been central to Descartes’ growth because of the importance and volume of transactions in the market and, most importantly, the expertise of London brokers.
Henry: How do you educate brokers or clients who are not aware of parametric insurance?
Alessandro: The great thing about the London Market is we can meet face to face. We discuss Descartes’ capabilities, then show examples of where we have developed a similar policy before. Once we have a first proposal, we can calculate what the policy would have paid after previous events. Then we can improve the proposal based on feedback.
Paul: Some explanations are simple, “If a category five hurricane rolls over this location, the claim is paid.” It is more challenging explaining solutions which involve multiple perils across multiple locations. The close collaboration in the London Market helps us understand the client’s needs and work with brokers to structure the right solution.
Henry: Why does Descartes sell insurance exclusively through brokers?
Paul: Brokers have expertise and know their customers’ needs well. We value the insight their perspective can bring to placing parametric insurance contracts.
Henry: In January, Descartes announced it had raised $120 million in Series B funding. What will the money be spent on?
Alessandro: The funding will be used to strengthen Descartes’ global presence through our offices across the world and grow our network of brokers. Descartes is also investing in the development of our technology platform, which supports underwriting and general operations, with a team of data scientists and software engineers. We are also investing in research and development to use different data sources to develop new products, such as parametric cyber coverage. We want to better serve our brokers and better protect our clients for the the new risks they increasingly face.
Henry: How is underwriting different at Descartes from incumbent insurers?
Alessandro: Descartes develops its own proprietary catastrophe models instead of using vendor models. We incorporate new data sources quickly and use them to inform our understanding of risk. This allows us to develop a new product within weeks, where traditional insurers could take years.
Paul: The technology platform means we can provide quotes more quickly to brokers, giving them enough time to make informed decisions. Due to the flexibility of our covers, we often find that they are more affordable than traditional insurance covers.
Henry: What makes a good data partner?
Alessandro: Good data partners must be reliable and accurate; we want the best possible data to settle claims. For example, ICEYE measures the footprint of floods precisely with its nanosatellites, and Reask models wind speed at any given location, which reduces basis risk for our clients.
Henry: Descartes has partnered with Generali, which provides Descartes with insurance capacity: what has your experience been with them?
Paul: Descartes’ partnership with Generali has been critical to our growth. We are grateful for the trust Generali has shown in our models and our approach. Its support gives us a solid foundation to serve customers and allows us to offer large amounts of capacity for our policies.
Henry: What examples can you give of solutions you have structured for clients, and why parametric fits them well?
Paul: Some of the best solutions for clients cover what has never been possible in the traditional insurance market. For example, parametric earthquake insurance for companies with underground assets, such as internet providers with underground cables or water companies with underground pipes.
Henry: Why is Descartes Underwriting part of InsTech London, and what sort of companies would you like to connect with?
Paul: InsTech London provides great content that allows us to learn from what others are doing. We value the podcasts and events.
Alessandro: InsTech London helps us to make our capabilities known to the community and to connect with other innovative companies. We would be interested to connect with brokers, data providers and (re)insurers.
For more information on Descartes Underwriting, go to descartesunderwriting.com