Descartes looks beyond parametric to diversification opportunities where it has 'data advantage'

(The Insurer) - Descartes Underwriting's entry into the cyber, machinery breakdown and credit risk markets has seen the firm expand beyond its traditional parametric weather and catastrophe offerings.

Co-founder Kevin Dedieu said that while parametric covers would remain the majority of its business, the insurer and MGA was expanding into other classes where it believes data can be better used.

Paris-based Descartes was founded as an MGA in 2018 with a focus on underwriting parametric weather and natural catastrophe risks for corporate clients. In 2022, it established full-stack insurer Descartes Insurance.

Dedieu, CEO of Descartes Insurance and chief scientific officer of Descartes Underwriting, spoke to The Insurer after the company announced its new credit and political risk offering last week, initially available for clients in France.

"We launched this … because credit risk is heavily influenced by several factors that we believe we can better model with all the models that we have developed over the years: first on weather, then for cyber risk," Dedieu said.

In this case, Descartes is not reinventing the product, he added. "We enter into this market with experienced underwriters that will leverage what we have developed internally."

The firm hired Benjamin Lambert in September 2024, followed by Hélène Martin last month, both previously single-risk credit and political risk underwriters at Coface.

"There is a demand for more capacity … (from) clients with international exposure in emerging markets and where the catastrophe exposure is higher," Dedieu said. Its new credit risk underwriters believed that access to Descartes' risk models would have affected their underwriting decisions in the past, he continued.

"For example, in Asia, in a country that is very exposed to a certain type of risk, they would have spotted that over the life of the contract, say three to five years, there was a high probability of having a very destructive event that could have increased the risk of default of the contract."

DESCARTES' EXPANSION STRATEGY

"When we enter into a market, it's either (because) we have a better product … or we think that we have a better modelling approach," Dedieu said.

The company's first product beyond weather and nat cat risk was a cyber cover launched in 2023. It pays out on a parametric basis for the number of days a business's systems are shut down following a malicious intrusion, with optional third-party liability cover.

Descartes also recently entered the machinery breakdown insurance market, Dedieu said, because it believed the technology it already uses for cyber risk modelling would give it data that would provide a "competitive edge".

Asked whether parametric weather and nat cat risks would remain the dominant portion of Descartes' portfolio in five years' time, Dedieu said: "I think parametric will still be the majority of our business."

But the company is open to opportunities to enter new classes where it believes it can bring data, which others do not currently use or analyse, to better assess risk, particularly if they involve models the firm has already developed for its weather and cyber products.

"It's unlikely that we enter into lines of business where it's very important to have a large history and where the data advantage is not that important. But for lines of business where we believe that data is really crucial and where it can be better used, we are open-minded," Dedieu said.

In particular, Descartes aims to use data to "insure things where some of our peers would retreat", he added.