On January 31, Paris-based managing general agent (MGA) Descartes—which specialises in leveraging parametric solutions to address climate and emerging risks—announced it had raised $120 million in Series B funding. Intelligent Insurer spoke to Tanguy Touffut, chief executive officer and co-founder of Descartes, to find out more.
The $120 million Series B funding round was led by growth equity firm Highland Europe alongside international investment company Eurazeo. It comes 18 months after the firm’s $18.5 million Series A funding.
For Touffut, there are three factors driving Descartes’ fund raise and expansion.
“First, there is an increase in awareness of climate change. Everybody is aware of the increased frequency of weather anomalies worldwide. We are facing more floods, wildfires, hailstorms, tornadoes and cyclones. We need to invent in the face of climate change,” he said.
Second, Touffut noted that there is an growing amount of data available in the industry, data that is key to innovation.
“There are plenty of datasets that are not yet leveraged by insurers and that can help us develop innovative insurance policies,” he added.
Finally, the hardening cycle means that brokers and risk managers are struggling to secure their insurance budgets, while insurers are trying to rebuild their margins and increase rates.
“Risk managers and brokers are being squeezed in the current environment. It’s a good time to innovate and come up with new solutions,” he said.
“It’s a good time to innovate and come up with new solutions.”
Tanguy Touffut, Descartes
Going global
Descartes plans to use the funds to fulfil a range of ambitions, including office expansion, building out its technology platform and the development of a new offering of products.
The MGA currently has three offices in the US, and plans to open others there, while also building out its team elsewhere. An office in Hong Kong is the next step in Asia, while Germany and Spain fit the bill in Europe.
“Today, we know the largest market is the US, but the fastest-growing region is definitely Asia. We need to grow in both markets aggressively,” Touffut said.
As well as opening new offices, Descartes is on a recruitment drive. Its data team currently consists of 63 people—Touffut expects the team to grow to 150 by the end of the year. Plans are also in place to double the software engineering team, as Descartes seeks to build its global platform to improve the way insurance is designed.
Backed by a panel of Tier one risk carriers and able to provide $200 million in capacity per policy, the MGA collaborates with brokers to protect their corporate and public sector clients against natural catastrophes, extreme weather and emerging risks.
“We can process claim payments very quickly—that’s the beauty of parametric insurance. Instead of having to wait 18 months for payment, we can process and make the payment within five working days. It looks simple from a theoretical standpoint but when there is a big natural catastrophe, being able to be extremely responsive is always challenging,” said Touffut.
“We want to avoid having many exclusions in contracts.”
The technology Descartes is building will “help to decrease cost, make sure we can better model the risks and make sure all of our covers will be extremely transparent”.
Turning to R&D, Touffut explained that Descartes sometimes needs to install its own sensor stations to be able to fully understand physical phenomena such as hailstorms.
“There are plenty of tools and new sensors we need to develop and install to make sure we understand the risks and improve the insurance covers,” he added.
With a focus on climate-related risks, emerging risk, and parametric triggers, Descartes is unlikely to start writing more “standard” business.
“We can cover the same risks, but we will always make sure our product features are better. We have to make sure it’s always transparent, and we want to avoid having many exclusions in contracts as this creates uncertainty for brokers and risk managers.
“While we may cover flood, wildfires, and hailstorms, we always make the policy in a different and better way,” Touffut concluded.
