Climate change demands financial innovation. Here’s a company that fronts cash to contractors to let storm-ravaged homeowners rebuild faster.
Climate change is driving up the frequency of extreme weather, pushing storms deeper into states not accustomed to regular events of severe wind, heat, flooding and more.
While scientists spread the word about warming-induced freak weather, and as businesses assess whether their warehouses can more easily flood and how much higher energy costs
will hit their bottom line, at least one financial services entrepreneur thinks he can fill a gap: helping homeowners quickly fund the repairs that follow a few moments of devastation.
Demetrius Gray, founder and CEO of fintech company Captain, said that after storms as powerful as Hurricanes Katrina and Sandy, the average recovery period for a damaged dwelling was 14 months. Smaller storms can still take up to five months for financing and repairs to be completed as the homeowner wrangles the mortgage company, insurance provider and contractors.
Captain, for a fee usually shouldered by the contractor, but with no interest, fronts the money to begin rebuilding in advance of the insurance claim and settlement. And it uses a slick app to connect all the stakeholders, which might include FEMA assistance. One-stop financing can be helpful in consolidating resources for those rattled by a devastating storm, proponents say. Captain is repaid when the insurance payout is collected.
“I don’t think you can wake up any morning at this point and not see some catastrophic event somewhere in the United States,” Gray told MarketWatch. “There used to be a time when those were one-off occurrences. That was really bad itself. Now you’re like, every day, there’s something… and some of this damage we’ve done to the environment is baked in. Frankly, many of the events don’t always rise to the level of national attention.”
Led by the deadly and costly Hurricane Ida and massive flooding in Europe, $329 billion in global economic losses were linked to severe weather last year, and only 38% of that bill was covered by insurance, Aon said in a report.
And fewer homes are ready for the cost and stress that can come with such damage. On average, a homeowner’s property insurance deductible is $1,000. A typical household, meanwhile, may only have $400 in savings, and a few thousand available on a high-interest credit card.
Captain, founded early last year and formerly called Claim Credit, is working with 50 contractors across the U.S. It has paid out $5 million to date toward recovery efforts. Gray anticipates being able to deploy another $20 million to contractors in the next three months, thanks in part to $104 million in total financing that the company raised, including in a funding round that just ended.
There is competition. Sunlight Financial, Enhancify and Billd all provide some level of funding to contractors. But Gray sees his company differentiating itself by focusing on the policyholder versus the insurance company.
“What typically happens is, there is no liquidity in the market for solving the disaster problem. The consumer has to wait until all of the money is in aggregate, right?” Gray said. “And there are sort of triggers along the way to keep track of. For instance, once the material gets delivered, you pay the contractor some money. And frankly, we think that creates a level of risk for the consumer. And it actually slows down the disaster recovery process.”
Depending on qualifying participants, homeowners may not have to advance the deductible to kick Captain and the contractors into action.
“The contractor is paying us directly out of his profits of the project itself, and so on. That is the only way we assess any revenue today, is by his or her utilization of our capital and administration of those clients. He’s paying us a fee for that,” Gray said.
He said most homeowners and contractors can access and handle the technology needed to connect with Captain.
“Normally the policyholder has found some temporary housing of some sort, and Captain has played a role in that in the past, booking hotel rooms and so forth,” Gray said. “We try not to inject any more complexity into the moment because it is complex and our contractors just need a very, very simple way to deliver. And so they do that on an iPad. And then text message links are sent to the policyholder to keep them abreast of how the project is progressing.”
Gray said he and the contractors think of the projects in 30-day segments. The Captain advance and fee is for funding a 30-day period. If it’s a more complex project, multiple 30-day segments are financed and strung together. So, for example: 30 days for roofing, siding and gutters; a fresh 30 days for drywall, windows and doors, and so on.
“‘The second and third waves [after a disaster] are these building contractors who are coming in to put life back together. That process can take months, sometimes even years.’ ”
Captain is also targeting new cities, including Dallas, Denver and Chicago, which often have exposure to hail.
The company is preparing for California’s fire season by recruiting homebuilders and remediation contractors there. As official data shows, California faces another potentially frightening year for extreme wildfires. More than 93% of the state is in severe or extreme drought, according to the U.S. Drought Monitor.
Gray sees Captain expanding into finance projects for homeowners in states where there is no requirement for insurance once you own your home outright.
And while Captain’s current format does not place requirements on a build-back intended to be more resilient to climate change, Gray does see the business moving in that direction.
Read: Blame it on the rain: Climate change has caused billions of dollars in flood damages
“You know, after a lot of these disasters, there’s certainly a first wave of response. But there are also second and third waves, right? And the second and third waves are these contractors who are coming in to put life back together. That process can take months, sometimes even years,” Gray said. “We decided we need to really speed up that overall recovery process, but then simultaneously, make sure that we’re building back better, a more resilient housing stock.”
California and a few other states include incentives for restoration after storms that could limit future damage, some at the community level and some at the household level.
“A lot of insurers, they’ll give you the money, and then they’ll say, ‘We’ve done our part and fulfilled our duty.’ But somebody has to be giving guidance: ‘How do I make my house better? How do I make a decision about where the best place is to live now, after these events?’” Gray said. “Frankly, the contractor is, a lot of times, put in that position, as a therapist of sorts after this trauma. We’d love to be able to give [contractors] the rails for how to do that well, every single time.”