Using IoT and Cloud Technology to Take on a $105B Problem — Buoyant’s Investment in FloodFlash

A Universal Problem

Floods are one of the most universal and destructive natural disasters. In 2021 alone, we saw catastrophic flooding impact communities across the US, Europe, Australia, and China. Flooding accounted for the most global economic losses of any natural catastrophe, with Aon estimating total flood losses reaching $105B in 2021.

With climate change, the frequency and severity of flooding will continue to increase. Since 1980, average annual flood events nearly tripled, and total flood damage in 2020 was 37% above the trailing 20 year average.

An enormous insurance gap makes flooding even more devastating. According to Aon, only 21% of 2021 global flood loss was insured. The insurance options that do exist are not meeting market needs. In the US, customers can choose between private insurers that typically have high premiums, or less expensive, but lower coverage policies offered by the US National Flood Insurance Program (NFIP). The NFIP accounts for 95% of policies in the US, but its future viability is uncertain and dependent upon successful policy restructuring efforts in response to the $36B in debt the program has accumulated since 2004.

Even if the financial woes of the NFIP can be solved, a months’ long claims and payout process can spell further disaster for policyholders. This is particularly true for business owners, whose risk of shutdown or bankruptcy increases as operational downtime extends. According to FEMA, more than 40% of businesses never reopen after a disaster, and for those that do, only 29% are still operating after two years.

A Game-Changing Solution

FloodFlash is solving the commercial flood insurance problem by doing things differently. High-resolution algorithms set premiums, and the company’s smart sensors detect when flooding water levels reach predetermined depths, at which point an insurance payment is triggered. Policyholders receive their payment within days. To date, FloodFlash’s record payment was 9 hours and 40 minutes post-flood. This “parametric insurance” simplifies flood risk coverage, reducing the costs and risk to both FloodFlash and their customers. The outcome is insurance coverage that works for both customer and insurer in the highest risk areas around the world, for the first time.

We found FloodFlash through our climate analytics and parametric insurance research. A cold LinkedIn message turned into a friendly partnership as we rapidly realized FloodFlash is one of the most promising companies in the space.

FloodFlash already has an MGA license, plus strong reinsurance and distributor relationships — achievements that make the company poised to scale and differentiate it from other players in the space. Even during a year marked by uncertain economic conditions and public health shutdowns, FloodFlash doubled their premium run rate between 2020 and 2021. A strong testament to their underwriting relationship, MunichRe Ventures joined us in this round along with a first class global syndicate of investors that include GlobalBrain, MS&AD, Proptech1, LocalGlobe, Pentech, and Insurtech Gateway.

We aren’t the only FloodFlash fans, though, take a look at how the insurance industry is recognizing them and hear what their customers are saying.

Impact

A recent report from the First Street Foundation analyzes the economic losses associated with flooding. Findings suggest that flooded US retail and office buildings will lose a combined 3.1 million days of operation in 2022. This loss of days, coupled with decreased output could total nearly $50B in economic impacts to local economies.

The local economies most impacted are likely to be at-risk, marginalized, communities (often those with properties in the lowest-lying areas of cities or without green space to absorb water). FloodFlash technology presents an opportunity to build resilience within these communities, providing coverage and fast payout to underserved business owners who rarely have financial reserves to wait months to repair and reopen.

Founder / Market Fit

FloodFlash co-founders Adam Rimmer and Ian Bartholomew met at RMS, the largest catastrophe risk modeling company in the world. After finding a parametric approach that allowed the New York Metropolitan Transport Authority to renew its flood insurance following Hurricane Sandy, Adam and Ian left RMS to bring this type of innovative solution to a broader market. Adam has a degree from Cambridge in Natural Sciences and Ian has PhD in glaciology and hydrology. Beyond the relevant experience and skills they bring to their product, we’ve been impressed by the thoughtfulness with which they lead and continue to build their team. They’ve hired risk analysts, engineers, and commercial managers from some of the leading companies in the world like Lloyds, Dyson, and AXA. A list of open job descriptions can be found here.

Buoyant Thesis Fit

While lowering emissions is critically important, we simultaneously have to find and scale solutions that enable us to adapt to the impacts of climate change that are already here. This is why Buoyant invests in both mitigation and adaptation digital solutions to climate change. FloodFlash is a shining example of an innovative adaptation solution to the exacerbated flood risks posed by climate change.

Welcome to the Buoyant Boat!

We are overflowing with excitement to welcome Adam, Ian and the FloodFlash team into the Buoyant boat!