A Climate Startup Aims to Reduce Flooding With Data

Flooding is a major problem around the world, and 83% of the damage it causes is not covered by insurance. A startup technology company has launched a new global flood-risk data service that its founders say will help narrow this "protection gap." Floodbase says its near-real-time flood monitoring can help insurers underwrite policies in time for the start of the 2023 Atlantic hurricane season. This is a major step forward in helping people protect themselves from the devastating effects of flooding.

The company, which was founded in 2016 and operated under the name Cloud to Street, has rebranded itself. The company uses satellite imagery, water gauge data, machine learning and other sources to track water levels before, during and after floods. This data provides an empirical foundation for insurance policies that automatically pay out when policyholders experience flooding beyond a defined level.

Floodbase has announced a $12 million Series A fundraise led by Lowercarbon Capital. The venture-capital infusion will help the startup further develop the technology that facilitates underwriting. Along with the fundraise, Floodbase has launched a new product and changed its name.

In recent years, insurers have begun selling policies that automatically pay claims when a specific physical parameter is met, such as wind speed or hail damage. This type of coverage is called parametric insurance.

Parametric flood insurance is a type of insurance that is targeted to larger areas, organizations or groups, and may complement traditional flood insurance that homeowners purchase for their own properties.

Floodbase has already enabled some financial institutions to underwrite parametric flood insurance. In Colombia, an international bank and a local lender teamed up to provide a policy to the nation’s farmers that identifies, with Floodbase data, three water levels (25-year, 50-year and 100-year flood levels) that will trigger insurance payments, according to Bessie Schwarz, co-founder and chief executive officer of Floodbase. Two of its partners in the project were Munich Re Group and parametric insurance company Raincoat, according to a June 2022 press release.

Insurers can use the new data to decide whether to offer additional flood coverage to existing parametric policies covering hurricane and wind damage.

The technology may have applications beyond insurance markets. Knowing where and how much flooding has occurred could help developed countries to assist poor nations recover from climate-related losses and damages, such as last year’s devastation in Pakistan, or to link disaster recovery and debt forgiveness.

There has been progress in the scientific understanding of hurricanes in recent years. Hotter water temperatures are providing cyclones with extra fuel and causing them to stick around longer. In the 1960s, hurricanes lost about 75% of their intensity within a day of striking land. Now that figure is closer to 50%. These studies point to a future of wetter - and likely stronger and longer-churning - storms, requiring people to improve their ability to withstand them.

Beth Tellman, a Floodbase co-founder and assistant professor at the University of Arizona's School of Geography, believes that adapting to current flood conditions is essential to preparing for future floods.

Tellman and Schwarz met while enrolled in a Yale School of the Environment master’s program in 2012. Inspired by their shared passion for science, they decided to start a company together. They secured grants from Google and a contract with the World Bank, and went on to partner with UN agencies and several national disaster recovery programs.

Schwarz said that she began to see climate change not as a political or scientific problem, but as a financial problem with financial solutions.

Floodbase's data comes from training machine-learning tools to recognize water in satellite imagery. To do this, the team used image-editing software to identify pixels in an image that represent water. The variety of water bodies on Earth, from temporarily overflowing rivers to lakes and ocean shores, required lots of image training. Current satellite images come from public providers and sometimes commercial vendors, such as Capella Space, Umbra Lab and Planet Labs, Schwarz said.

According to Schwarz, publishing their science in peer-reviewed journals has given them a significant advantage with insurers. He explains that insurers need to be aware of new developments in order to write policies accordingly. This is something that is not common in the tech world, but Schwarz sees it as a major strength for his company.