Tesselo is one of the companies looking to help its clients manage the impact of climate change, using satellite data and remote sensing to monitor tree and crop health and support forest owners and farmers in mitigating risks.
The company, based in Lisbon, is now exploring insurance applications for its data and analytics and was recently selected to join Cohort 6 of the Lloyd’s Lab.
Matthew talks to Chief Strategy Officer and Co-founder Marine Utgé-Royo on Podcast 143 to discuss how Tesselo’s technology is tracking changes in forests and how it can help with compliance to environmental regulation.
Talking points include:
- Measuring forest health and carbon sequestration bonds
- Building High Definition vegetation models and risk maps from satellite data
- Closing the insurance protection gap
- What Tesselo's clients think about insurance
- Parametric solutions for fire and flood risk
- The advantages and opportunities provided by the Lloyd’s Lab
More information on the companies and technology helping insurers to identify and manage climate change risks is available in our Location Intelligence 2021 report, which is free to InsTech London members.
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Continuing Professional Development - Learning Objectives
InsTech London is accredited by The Chartered Insurance Institute (CII). By listening to an InsTech London podcast, or reading the accompanying transcript, you can claim up to 0.5 CPD hours towards the CII member CPD scheme.
The Learning Objectives for this podcast are:
- Comprehend some of the different types of data associated with the environment and how they're sourced
- Realise the actionable insights that can come from environmental data
- Understand how data can help manage climate change and its value in CSR (Corporate Social Responsibility) and ESG
To continue learning about the intersection of insurance and climate change, read our insight Regulation – the next innovation super-charger for climate change risk assessment?
Let us know you have listened to this podcast and if your organisation is a member of InsTech London you will receive a quarterly summary of the CPD hours you have earned.
To help us measure the impact of the learning, we would be grateful if you would take a minute to complete a quick feedback survey.
Geospatial intelligence for forestry risk - Episode 143 highlights
Matthew: What does Tesselo do?
Marine: We work with industrial and non-industrial clients to help them manage land resources. For example, we monitor plant health and detect threats to maximise their lifecycle. Forest owners or farmers can then act in time to protect the forest or crop. We also monitor environmental criteria such as biodiversity index, biomass and carbon sequestration potential. We ensure compliance to environmental regulation, and we can issue an alert if we detect deforestation.
Matthew: I noticed that you've changed your job title from Chief Sustainability Officer to Chief Strategy Officer. Why have you done this?
Marine: We originally created the role of Chief Sustainability Officer to ensure that we stayed true to our initial mission: to accelerate the transition to environmental sustainability. But then we decided that sustainability is part of the general strategy of the company. My role is the same, but now it's directly incorporated into other types of strategic decision making.
Matthew: Can you talk about some of the companies you work with?
Marine: We are not working with insurance companies yet. Our two current markets are forestry and infrastructure. In the forestry sector, we work with timber producers, investment funds that sell carbon sequestration bonds, governments and NGOs that launch reforestation or afforestation projects. In the infrastructure sector, we mainly work with electricity transporters and distributors.
Matthew: For those that are not familiar with carbon sequestration bonds, can you explain how they work?
Marine: The basic idea is that any entity can measure its carbon footprint and decide to offset it. Sometimes it's mandatory, other times it's on a voluntary basis. The carbon market is growing very fast. Forests are one of the most efficient ways of offsetting because trees sequester carbon. It's necessary to have a tool that ensures that the asset - the tree - is still alive and delivering the carbon capacity that it’s been assigned. We work with Livelihoods, one of the biggest carbon investment funds in France, to do this for them.
Matthew: How are you helping companies on the infrastructure side?
Marine: We are working with electricity transporters and distributors to help them optimise vegetation management around their grid. A lot of these electric grids stretch over forested or vegetated areas. Asset managers need to ensure that they respect regulation when it comes to distance between vegetation and power lines, but of course they want to trim vegetation in the most respectful way. Because we use open data, we are able to work at a very large scale. We monitor the grid all the time and we issue a risk map. Based on this, electricity companies can optimise their vegetation management, and only cut trees where it's necessary.
Matthew: How does a client work directly with you to get some actionable insights?
Marine: In a nutshell, they have three main objectives: to protect their assets, to optimise their operations and to comply with environmental regulations. For protection, we monitor plant health - we are able to detect early signs of pests infecting a tree or a crop, for example. To optimise operations, we compute the biomass of a given forest on a weekly or monthly basis. When it comes to regulation, we’re able to measure the distance between infrastructure and vegetation and make sure it's compliant with any kind of environmental criteria or regulations.
Matthew: How do companies pay you to get information?
Marine: We want to work on a subscription basis. That's how we work with our timber producer clients. They receive a forest inventory update every month or semester. For electricity businesses we are still doing ad hoc projects, but we're confident we can transform that into a subscription basis.
Matthew: Are you using satellite data?
Marine: Yes, and we focus on open data. Environmental change has to be monitored on a very large scale, so we need a cost effective approach. The main satellite we use is Sentinel-2, which has been specifically designed to monitor plants. We develop our own methodology to make the low to medium resolution more actionable. Our model allows us to downsize a 10 metre resolution image to a one metre resolution.
To train the model, we use high resolution metrics that are provided by our clients - for example, a LIDAR campaign. It's very expensive to fly a drone or helicopter over large areas and it provides valuable precision data, but it's often only used once as it becomes outdated. We reuse this information to make our models more powerful and extract more information from open data. We train the model once and then we don't use the high resolution data anymore.
Matthew: Tesselo is currently in cohort 6 of the Lloyd’s Lab. What led you to take a look at insurance?
Marine: We have all this environmental knowledge, and we observed a gap in the market. Forests make up 30% of land, and there is a rise in the carbon sequestration market. These assets (trees) are vastly uninsured. We thought we could address this protection gap by leveraging our tech to make current insurance products more efficient, and also to penetrate the market of parametric insurance.
Matthew: What are the main risks that forests suffer from?
Marine: There is storm and fire risk, and in some areas drought and pest attacks are threats. We think that Tesselo can add value all along the insurance chain. For underwriting, we have access to a lot of historic data from satellites. We can get information such as how many times a forest has burned, been attacked by pests or been flooded. When it comes to claims, we can get an eye on the ground. Even though it’s not exactly real time, we can offer a great improvement in helping to sort claims in a more efficient way and to help with fraud detection.
Matthew: Have you been doing anything with insurance companies prior to the Lab?
Marine: We were in a discussion with Descartes Underwriting to see how we could work with parametric insurance. Two possibilities are fire and flood risk, for which we’d look at soil moisture index.
Matthew: What does being a part of the Lloyd’s Lab involve?
Marine: The main advantage is the networking opportunity. Lloyd’s is widely recognised, so it opened a lot of doors for us. We had access to companies and specialists that we wouldn’t have reached otherwise. Also, because we don’t come from the insurance world, it’s an opportunity to get a master class on the sector.
Watch or listen back to InsTech London’s event, The Future of Lloyd's and Claims Solutions for Complex Risks.
Matthew: Can you talk about some of the companies you've come across in the Lab?
Marine: We have a group of mentors from companies including Tokio Marine Kiln, Atrium and Inigo Insurance. They are not big on forest insurance or parametric insurance, so there isn’t a use case to be developed with them. But they have helped us get the right information and talk to the right people. Now we have conversations going with forestry specialists such as ForestRe.
Matthew: Are you seeing companies that want to do more with forestry insurance?
Marine: We haven't identified a concrete use case yet - we're still learning how we should package our data to make it valuable for insurance companies. Forestry is currently a very limited market. This is because forestry insurance is not subsidised except in some specific countries. As well as this, forests have a long life cycle compared to crops, so it's a long term risk. What we need to do is to pinpoint the key data that are valuable to insurers.
Matthew: As a startup, it can be easier to work with third-party data providers rather than selling directly to insurers. Have you spoken to any companies like HazardHub, WhenFresh, Addresscloud and Gamma Location Intelligence?
Marine: Our information will always be aggregated with other data. It makes sense then to work with companies that already aggregate data, have multiple sources and speak the same language as the underwriter or reinsurer. Skyline Partners aggregates data from multiple sources to build index-based parametric insurance. It would make sense for us to work with a company like them.
Matthew: Are you hearing anything from companies about the value of what you're doing for things like ESG (Environmental, Social and Governance) reporting?
Marine: Yes, and we want to further align our actions with frameworks surrounding CSR (Corporate Social Responsibility) and ESG. What we do for current clients is linked to their general carbon footprint. We have large energy companies that have a lot of land, and they are realising their value in terms of carbon sequestration. They have asked us to include these lands in our monitoring. They want to understand how they could improve the environmental performance of their surrounding land.
We are confident that in the future clients will ask us to work under the TCFD (Task Force on Climate-related Financial Disclosures). We are also in discussions with a UNDP bureau of an African country to help them account for the carbon sequestration of their forests.
Matthew: Do you see any opportunity with your clients to help them understand ways to manage their risks before they start talking to insurers?
Marine: A lot of our current clients don't see insurance as a solution - they see it as a cost. In Portugal, the majority of industrial forests are not insured. Forest managers prefer to mitigate fire risk rather than pay for insurance. Some investment funds also prefer to make their own mechanisms to compensate for potential financial losses rather than paying for insurance.
Matthew: You have Demo Day coming up with the Lab. What are you planning to show?
Marine: Demo Day is taking place on 7/8 July. We want to share a business plan analysis of remote sensing for insurance, focused on forestry and natural disaster management. Our goal is to pinpoint the most relevant type of information that we can produce that will add value to insurers.
Matthew: If people want to find out more about what you're doing, what's the best way to learn?
For more information on Tesselo, go to tesselo.com