Unpredictable power outages, often driven by more frequent weather events and outdated infrastructure, have increased in incidence by 78% over the last decade compared to the previous one. These interruptions are costly and jeopardize the long-term viability of local economies. Simultaneously, the severity of climate-related disasters, such as the recent wildfires in Los Angeles, has forced many traditional insurers to withdraw from regions most susceptible to climate-related risk, leaving property owners and businesses exposed to significant financial uncertainty.
As climate change accelerates, traditional insurers and incumbent models are struggling to keep pace with increasingly devastating impacts to businesses and communities. American businesses alone lose $150 billion annually to disruptions in production caused by power outages, damage to sensitive equipment, and significant revenue losses. In late 2023, Montauk Climate recruited Mike Gulla and Arik Yelovitch, two of Hippo Insurance’s first employees, to redefine how we manage climate-related risk. Together, we underwrote the potential for parametric insurance to contribute to a global landscape where unresponsive, one-size-fits-all policies no longer suffice. By integrating advanced data analytics, real-time climate monitoring, and flexible policy design, Adaptive Insurance’s first product, GridProtect, offers novel insurance solutions for small- to medium-sized businesses (SMBs) threatened by unexpected short-term power outages. Where traditional insurance does not cover short-duration business interruption and has notoriously long payout times, Adaptive Insurance provides rapid, tailored support during crises.
Parametric insurance, which promises swift payouts based on predetermined triggers—like power outages exceeding a specific number of hours, specific wind speeds, or rainfall levels —has faced significant challenges in the United States. Parametric models have often proven too complex, failing to account for the diverse and dynamic nature of climate events across various regions. This complexity has hindered widespread adoption by SMBs and consumers, as businesses and homeowners remain wary of coverage that might leave them underinsured. In contrast, Adaptive Insurance leverages the best aspects of parametric triggers—speed and payout transparency—while integrating them into a more comprehensive, AI and data-driven risk assessment framework. This hybrid approach allows policies to be tailored more precisely to individual circumstances.
Adaptive Insurance’s launch marks a significant step forward in rethinking how we approach economic resilience to climate-related risk. It reflects a broader shift towards more flexible, data-driven solutions that can adapt quickly to the changing environment and work well for a larger population. By addressing the shortcomings of traditional insurance and providing robust support where it’s needed most, Adaptive Insurance is not just providing an insurance product—it’s creating a vital tool for communities and businesses, providing peace of mind and ensuring economic stability for an adaptive future.
We are grateful to Adaptive’s management team for their partnership, as well as to Congruent Ventures and Generation Space for their belief in Adaptive’s vision to serve as the first line of response to disaster in an increasingly volatile climate. To learn more and get involved in what Adaptive is building, reach out to the team here.
