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Parametric Wildfire Insurance

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1. General


SDG 9: Industry, Innovation and Infrastructure



2. Project Details

Company or Institution

Descartes Underwriting


Parametric Wildfire Insurance

General description of the AI solution

The wildfire risk landscape is changing and around the world wildfire has become a predominant
hazard, with each year seeming to bring more serious events and losses. Wildfire ignition, intensity
and propensity to spread are heavily influenced by factors such as: drought conditions, winds, high
heat, low humidity, lightning, and human activity. Climate change compounds these factors, making
these weather conditions a more regular occurrence and further driving losses. The increase in
frequency, impact and complexity of wildfires leave businesses, communities and individuals
vulnerable and in need of innovative solutions to bolster their resilience.
At Descartes Underwriting we have designed an insurance solution to do just that. Based on the
principles of parametric insurance, satellite data and image recognition, our project has 3 key
1. Analysing land specificities to assess land vulnerability to wildfire risk (referred to as
Large Fire Potential index or LFP), based on image recognition and artificial intelligence
techniques using the latest advancements in satellite data.
2. Modelling how wildfires appear and spread, in order to understand the risk of wildfire, predict
future trends, and facilitate prevention methods.
3. Building a combustion index that enables a new generation of parametric wildfire insurance –
making it possible to cover policyholders swiftly for wildfire events, often within a matter of
days. Swift straight-forward payout is possible regardless of whether the client is a large
forestry manager with millions of hectares, or one with small parcels at varying locations.
Getting quick and objective relief after such events is paramount to businesses’, communities’
and individuals’ resilience.
Our parametric wildfire product is particularly suitable for wildfire-prone sectors like forestry,
agriculture, energy, tourism and the public sector. Descartes’ wildfire product creates a positive social
impact by empowering businesses and people in wildfire-affected areas to have the financial means
readily available to them to recover both quickly and in full from wildfire losses.



Descartes Underwriting

3. Aspects

Excellence and Scientific Quality: Please detail the improvements made by the nominee or the nominees’ team or yourself if your applying for the award, and why they have been a success.

Descartes’ innovative edge stems from our ability to synchronize with the most recent data sources
and extract wildfire risk insights using our in-house algorithms.
Robust machine learning algorithms, image recognition techniques and cutting-edge statistical
analysis methods enable us to perform underwriting derivations without compromising with the
interpretability of our models. Our analytical tools are adapted to handle a wide range of data sources,
including satellite imagery, IoT, stationary sensors, radar or sonar data.
Built from objective data sources, our models are precisely crafted to cover against wildfire exposure
and other climate risks in ways where traditional underwriting methods fall short. Not limited to
looking backwards at claim histories, we model the underlying phenomenon directly, capturing trends
and climate change impacts to better protect corporate and public sector clients.
Our challenge is applying state-of-the-art scientific research to the insurance sector and progressing
TRL from 6 to 8. Scientific research has already outlined and defined the relevant factors for the
probability of occurrence and the propagation of a wildfire, but often at an aggregate regional level
that excludes site or client specific exposure factors for insurance-based resilience. Further, scientific
research mainly focuses on the hazard module, often at the exclusion of vulnerability and exposure
modules, whereas Descartes adapts research to a new approach that directly models variables’
Hazard*Vulnerability*Exposure. Our approach enables rapid analysis of assets for any number of
clients, on any type for terrain, vegetation, climate and geography.
While we are progressing optimization of our output prior to seeking IP measures, the contract signed
between the Generali Group and Descartes Underwriting includes an IP component which guarantees
Descartes ownership of all models and products developed during the on-going partnership. The
intellectual property of our wildfire product is therefore protected as such.

Scaling of impact to SDGs: Please detail how many citizens/communities and/or researchers/businesses this has had or can have a positive impact on, including particular groups where applicable and to what extent.

Climate change and urban expansion amplify the annual wildfire losses and indicate negative trends.
In light of this, various vulnerable sectors remain underinsured and receive subpar insurance service.
At a total market potential of above $ 15 billion, parametric wildfire insurance presents itself as a
strong contender to solve major pain points of policyholders and insurance industry alike. The wide
majority of historic and recent wildfire losses have not been covered by insurance, particularly in
emerging markets and developing regions.
Our parametric wildfire insurance touches on multiple SDGs, including:
SDG 7 – Parametric wildfire insurance supports the production of renewable energies. Forestry
companies will be able to better meet the expectations for biomass energy by replacing the
wildfire-affected timber more efficiently. The guarantee of quick and transparent payments ensures
their financial viability and facilitates investment.
SDG 9 – Our project reduces underinsurance in certain industries like forestry and agriculture and
helps secure credit access in risk prone areas. It also represents a full-fledged new type of insurance
for wildfire risks (quick payout, bespoke to client asset locations and value, real-time monitoring),
thereby introducing a new innovation into the market.
SDG 10 – Customer segments in emerging markets such as India, Brazil and Chile benefit from easier
access to affordable, bespoke insurance and lower transaction costs leads to better fire risk
management, reduced financial volatility and reduced insurance inequalities. Insights from our fire
risk modelling can be used to enhance fire prevention measures.
SDG 11 –We improve the resilience of cities and communities close to fire prone areas through more
precise risk assessment and swift payouts, often within mere weeks following wildfire. This is
especially important after catastrophic wildfire events when other insurers may exit the market. Lastly,
forests support the air quality of its communities. By covering financial losses of forestry companies
and the public sector, our product supports the swift planting of new trees or other vegetation
recovery measures.
SDG 13 – Thanks to our innovative approach to risk modelling, Descartes is able to inform objectively
on the wildfire risk and account for outlyer wildfire events that come with climate change in the
process. Our swift payouts lead to improved climate risk resilience, beyond wildfire risk.
SDG 15 – By enabling invested parties to better hedge their risk, we empower them to improve on
their current forest management practices through better risk assessment and replant quicker
through swift payout.

Scaling of AI solution: Please detail what proof of concept or implementations can you show now in terms of its efficacy and how the solution can be scaled to provide a global impact ad how realistic that scaling is.

Having developed a fire risk model for pilots (Chile, USA, Australia) to cover fires affecting very large
areas, we went on to standardize the product. It has been quoted now for various large forestry
operations and public sector clients around the world. As we collaborate with more brokers to help
them bring the value proposition of parametrics to their client base, our in-force portfolio is rapidly
expanding. More than 150 corporate and public sector clients have already chosen Descartes to
protect themselves against climate risks, many of whom are Fortune 500.
In terms of impact, Descartes is proud to be the largest parametric specialized firm globally. We offer
parametric coverage for all natural catastrophic perils, across all trade sectors, & all geographies.
Structured as a Managing General Agent, we write on A-rated paper supported by best-in-class
(re)insurers. To date we have served, 150+ corporate & public sector clients, through our work with
500+ partner brokers & account managers around the world. Our parametric insurance products
already provide cover in 60+ countries and we are able to provide up to $200M USD in available
capacity per contract – this is a game changer for high exposure markets in the developing world.

Ethical aspect: Please detail the way the solution addresses any of the main ethical aspects, including trustworthiness, bias, gender issues, etc.

The insurance industry has paid out billions in claims from recent wildfire events, leading to a natural
tightening of the market. Most brokers report capacity shrinking or wildfire risk exclusions being
pushed onto policies, under the pressure of compounded losses and cost increases in the reinsurance
market for wildfire coverage. This leaves policyholders looking for coverage in the traditional
insurance market with higher premiums, increased deductibles, or cap payouts for wildfire losses. In
this environment, alternative coverage solutions offering new capacities are being increasingly
Parametric wildfire insurance is customized to a clients’ exposure and is structured using satellite
imagery, long-term climate, and weather data. Utilizing historical wildfire data and a client’s value per
hectare, parametric covers provide a transparent structure that allows clients to be certain of the
payments they will receive in the event of a wildfire without exclusions.
Rather than a claims process that can take months or years, payments are made within a matter of
days or weeks. If a wildfire occurs, then the client will receive the full payout based on the number of
acres burnt, as laid out in their policy structure.
In terms of inclusiveness, parametric insurance also offers the flexibility to cover any financial losses
incurred from an event without restriction. For example, if a vineyard loses tourism revenue from a
tasting room burning down or loses a plot that produces a particular grape or wine, these would also
be covered under the parametric policy. Parametric insurance offers balance sheet protection that
allows all entities or individuals the ability to recoup their losses, rebuild, and continue their business
operations in a matter of weeks after an event.


International Research Centre in Artificial Intelligence
under the auspices of UNESCO (IRCAI)

Jožef Stefan Institute
Jamova cesta 39
SI-1000 Ljubljana


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