A number of weather risk transfer transactions have been originated and executed thanks to Speedwell Weather’s parametric weather risk transfer platform weatherXchange, while requests for pricing of contracts are rising, according to the company.
Speedwell Weather, a provider of weather data, forecasting information, analytics, software and consultancy for the weather derivatives and weather risk management market, launched its online technology based weather trading platform weatherXchange just over a year ago.
The platform allows protection buyers and sellers to meet and transact parametric or index based weather risk transfer contracts, with a number of the capacity providers signed up the system being ILS fund managers, alongside some of the largest reinsurance firms.
The firm also launched an Instantaneous Indicative Pricing service in October, which is calculated using configurable pricing algorithms that are hosted by the capacity providers themselves, meaning they can control their own pricing for index-based weather hedges that they bid for on the exchange.
So far Speedwell says that 65 unique requests for pricing have been sent through weatherXchange and a number of contracts have been originated through the exchange and executed with partners.
These contracts range from a European energy transaction in excess of $10 million, to standard U.S. energy contracts (HDD/CDD), as well as a few smaller Agricultural weather risk hedges, Speedwell explained.
The launch of the Instantaneous Indicative Pricing service saw many more price requests being logged, with now 3,500 separate pricing requests sent through the system, which are delivered to the five companies providing the service, Coriolis, GuaranteedWeather, Munich Re, Sompo, and most recent joiner AXA Global Parametrics.
The new pricing service has helped to change the way weather hedgers look for price indications, with Speedwell’s clients shifting away from the old RFP distribution model.
“We think that (1) price discovery is increasingly accomplished via the Instantaneous Indicative Pricing service and (2) being satisfied with the instant pricing received users may be simply transacting with the companies showing Instantaneous Indicative Pricing,” Speedwell explained.
However, the firm also added that it is important for weather hedgers to get the broadest possible range of price quotes, so it encourages firms to still send out their RFP’s.
211 companies are now registered to use the weatherXchange platform, more than 50% of which are hedgers looking for weather risk transfer solutions.
Speedwell has begun to glean insights from the pricing requests its system hosts, learning the following already.
Top five requested weather stations via Instantaneous Indicative Pricing
- New York-JFK International Airport
- London Heathrow
- Stuttgart Echterdingen
- Atlanta-Hartsfield International Airport
Top five requested weather variables
- Daily Average Temperature (TMin+TMax)/2
- Daily Precipitation
- Daily Minimum Temperature
- Daily Maximum Temperature
- Daily Wind Speed
The use of electronic risk placement and trading platforms can only help to make risk transfer more efficient and accessible, as well as providing greater price transparency and allowing the market’s risk appetite to set the price of risk.