Kettle: Reinsurance to cover Americans against climate change

Here on the West Coast, when we check the weather every day, we check AQI. In other parts of the country, we board up our windows for hurricanes or avoid the outdoors in extreme heat waves. The impact of climate change is, unfortunately, very much here — we are feeling its effects more and more each year. Its impact can’t be predicted using historical data. And that’s a big problem for the industry that exists to help protect us when catastrophic events happen: insurance.

Traditional insurers, and even more importantly, reinsurers, who provide the capital to cover the risk taken on by insurance companies, use historical models to underwrite risk. Because history doesn’t predict the future when it comes to climate, reinsurers have fled from categories that touch climate. On the West Coast, that means reinsurers don’t want to provide the critical capital needed to protect homeowners from wildfire risk, leaving insurers with a hazardous balance sheet of existing policies and consumers with significant challenges when trying to buy new coverage.

Tackling this data-driven challenge is critical not only to the insurance market but also to the wellbeing of Californians at large, which is why we are proud to announce that Acrew is co-leading a $30m Series A in Kettle, alongside our frequent partner, Homebrew. We’re also excited to be joined by True Ventures, Anthemis, Valor, DCVC and LowerCarbon Capital.

Kettle is a tech-enabled reinsurance Managing General Agent (“MGA”) utilizing advanced data analytics to offload climate risk from insurers. Interestingly, while wildfire risk has grown dramatically over recent years, the share of structures that have burned down in California is low — less than 0.1%. The key is to uncover where the risk is. Doing so will stabilize California’s insurance market.

Since we initially invested in the Seed, Kettle has predicted the impact of California’s fourteen largest fires in 2020 and has already predicted the area of 2021’s Dixie Fire as one of the most dangerous areas in the state. Kettle’s continued predictive accuracy is testament to the depth of their ML-driven platform, which runs proprietary algorithms to process terabytes of data from public and private sources (e.g., NOAA weather data, NASA’s MODIS and LIDAR satellites). The neural networks in question leverage up to 140 million parameters to calculate probabilities of fire damage at the half square mile resolution across the state. We believe reinsurance is best suited for deep ML — Kettle is honing its models on a very specific type of risk, and over time, will entrench its position as the leading solution for climate reinsurance.

Most importantly, Andrew, Nat and the rest of their team bring incredible depth across reinsurance, machine learning, and crisis & catastrophe risk analytics. We’re inspired, not just by their opportunity to disrupt this massive industry, but also by their ability to proactively prevent destruction. Having the kind of sophisticated rendering of risk that Kettle is developing can help firefighters and local officials create shorter-term evacuation plans, determine where to build fire breaks, and better allocate resources

We’re grateful and relieved that Kettle continues to forge a way to understand and manage our climate-impacted future. We’re thrilled to call the Kettle team part of our crew.

As much activity as we’ve seen in insurtech over the past 5 years, reinsurance, a $300bn market with over $600b of capital dedicated, is still largely unpenetrated by tech entrepreneurs. Kettle is pioneering what we think will be a new phase of reinvention in reinsurtech.

By Lauren Kolodny, Vishal Lugani, Maitree Mervana Parekh & Charlie Liao