DC’s Demex Group raised $5M for its climate software

As the world continues to feel the impact of climate change, one local startup just nabbed some funding for its tech take on the solutions.

The Demex Group, which was founded in 2020, just raised $5 million in a round led by existing investor Blue Bear Capital. The DC-based company, which developed a product to help insurance companies make severe storm predictions and anticipate damages, plans to use the funds to take this product to market.

Stephen Bennett, cofounder and chief climate officer, said that the company originated back in 2005 when its leadership was working in the energy and commodities trading space. Together, the leaders created an analytic structure using climate and weather information to predict natural gas and electric prices as well as metrics for reinsurance policies.

A little over a decade later, they realized there were even more applications for the product.

“We got together and decided that that endeavor would do well as its own standalone company,” Bennett told Technical.ly.

Now, the 16-person startup developed a product for reinsurance for severe thunderstorms and other smaller weather events. What used to be lower on the priority list than hurricanes and earthquakes is now front of mind for insurance companies, said Demex Group President and CEO Bill Clark.

“The losses from these other weather events are now actually larger than all the losses from all catastrophic events worldwide,” Clark said.

Currently, insurance companies cover costs from major events like hurricanes and tornadoes through something known as reinsurance, which is essentially insurance for insurance companies. These exist because it’s possible that an insurance company wouldn’t have enough money to pay all the claims on its own, Clark said. But they haven’t accounted for these newer issues of so many storms and lighter weather events increasing because of climate change and therefore costing more.

Demex, in response, created a product that will help predict the risk and financials of these storms in order to create new reinsurance policies. Demex starts with predictive weather and climate data sets over the span of about a year. From there, it brings in customer policy and claims information from insurance companies to get an accurate feel for the costs of such weather events. Both data sets are put together in the risk model Demex created for a financial model that insurance companies can then use to build reinsurance contracts.

As climate change increases storms, the need for this kind of product only grows, Clark said.

“It is growing to the point that it’s now the biggest problem in the insurance industry, and yet their ability to deal with this problem financially is very, very underserved,” Clark said.

With the funds, Bennett and Clark said they’re ready to bring the product to the marketplace. That will mean growing the analytics and modeling teams as well as the sales team. All in all, Bennett said the company will likely be adding about five to 10 people with the funds.

This investment is a key growth moment for Demex, though, as the company has spent a large portion of its time working with reinsurance providers and getting them on board with the product. Now leadership has the freedom to take it a lot further, Clark said.

“They had to get very comfortable with the way we model these weather perils, ultimately so that they would be able to underwrite these products,” Clark said. “So that’s what we spent our time on, and now that we’ve done that, we are now ready to go to market.”