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FloodFlash raises £1.9 million to meet growing demand for flood insurance

ImpactAlpha, August 8 – Only $9 billion of the $50 billion in flood-related damage caused every year is covered by the insurance industry, insurance tech startup FloodFlash claims.

The U.K.-based startup’s model is to use parametric, or “event-based,” flooding parameters to cover small businesses located in flood-risk areas. In this type of insurance, “event parameters” are set in advance—say, flood waters reaching a certain level—to automatically trigger fixed payment to policyholders.

The upside is that policyholders don’t have to file claims and get paid quickly, while insurers don’t have to process individual claims. The downside is that there’s a risk policyholders will incur more damage than the policy covers.

“Climate change is leading to more extreme weather events, but these are often hard to insure,” said Tara Reeves from LocalGlobe, which backed FloodFlash’s seed round along with Pentech Ventures and InsurTech Gateway. “Parametric insurance dramatically reduces underwriting and loss adjustment costs, and those savings can be passed on to the consumer.”

Insurance industry professionals and experts have reported growing interest in parametric insurance to mitigate weather- and climate-related risk. 

“We are seeing growing interest in regions like Florida, where we have the high risk component but also because of the significant deductibles associated with traditional hurricane policies,” Stephen Moss of risk modeling company RMS told Insurance Journal.

FloodFlash’s specific product pairs policy coverage with an internet-connected water sensor, that registers when flood waters reach a certain level. The product is currently being piloted in Carlisle, in the northeastern part of the U.K. and in other areas of the U.K. with high flood risk.

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