Speedwell Weather owned parametric weather risk transfer platform weatherXchange has launched instant indicative pricing for index-based weather insurance and derivative contracts sold on its technology platform, aiming to streamline pricing and quoting of weather hedging.
weatherXchange said that its Instantaneous Indicative Pricing service, which will be available through a number of participating protection sellers, will be calculated by a piece of using configurable pricing algorithms that are hosted by the capacity providers themselves.
In this way the protection sellers on the weatherXchange platform, which include such ILS fund stalwarts as Nephila Capital and Coriolis Capital, and reinsurance firms including Swiss Re, Munich Re and Sompo International, can control their own pricing for index-based weather hedges that they bid for on the exchange, if they choose.
We’re told that initially only Munich Re, Sompo International, MSI GuaranteedWeather and Coriolis Capital are signed up to offer this service.
The Instantaneous Indicative Pricing service is built into the structuring process on weatherXchange, offering instant price feedback on the cost of a structure to the hedger, allowing aspects of the hedge to be modified to find a structure that matches their budget.
The new service will also help on price discovery, making it more efficient for the protection sellers and capacity providers, while protection buyers can get cost indications early in the process before even contacting a potential counterparty for their weather hedging transaction.
It’s also possible to transition seamlessly from the indicative price through to firm, executable pricing on the platform as well, reducing overheads for both sides involved in the transaction.
“We believe Instantaneous Indicative Pricing from multiple Protection Sellers can dramatically improve market efficiency”, explained David Whitehead Co-CEO at weatherXchange. “This breakthrough will help change how hedgers and brokers interact with the market. Our goal is simple: to improve market efficiency, thus improving the hedger’s experience and further driving the use of index-based weather hedging as a financial tool.”
Michael Moreno, Co-CEO of weatherXchange also said; “weatherXchange aims to reduce the frictional forces of placing weather risk. The provision of indicative pricing from multiple Protection Sellers streamlines the structuring process for the Hedger while also reducing the workload of the Protection Sellers especially in the early stages of defining a transaction. We believe the technology built into the weatherXchange platform will expand opportunities for all participants in this space.”
The Instantaneous Indicative Pricing service will be made available on the weatherXchange platform from mid-October 2017.
The platform is not just for corporate weather risk transfer buyers either, it could provide an efficient way to get instant pricing feedback on hedges linked to weather parameters for insurance, reinsurance or insurance-linked securities (ILS) funds in need of hedging capacity.