Swiss Re Insurance-Linked Fund Management

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Wind power indices for risk transfer added to weatherXchange


Indices designed to facilitate the trading of weather risks related to wind power have now been added to weatherXchange, the parametric weather risk transfer platform operated by specialist Speedwell Weather.

Wind farm imageweatherXchange makes it easier for companies to access index-based weather risk protection, listing a range of weather risk transfer products that are all parametric in nature as well as capacity providers from the reinsurance and insurance-linked securities (ILS) market that can support them.

The company has now included the Speedwell Wind Power Production Indices on the platform, with indices available covering thirteen countries, including Australia, some European countries, and North America.

The wind power indices have been integrated in such a way that users of weatherXchange can still benefit from structuring, Instantaneous Indicative Pricing, and RFP distribution to potential risk markets.

That means those looking for risk transfer related to wind power production can benefit from simple price discovery and receive quotes and pricing directly from capacity providers, such as som global reinsurance market participants and ILS funds.

Instant feedback is possible for some indices, where pricing has been standardised and made available through weatherXchange.

“The importance of these indices is increasingly obvious each day. These products allow traders and end users the ability to better manage the impact of excess wind power (or lack of wind power) into the grid,” explained Dave Whitehead, Co-CEO of weatherXchange. “In the past, wind contribution to total power production was minimal. Today, the management of wind risk cannot be ignored. Recent OTC trading activity on these indices makes this the right time to add these indices to weatherXchange.”

Marcel-Steffen Reif, Head of Weather & Commodity EMEA at reinsurance firm Munich Re, and a capacity provider on the weatherXchange platform also commented, “The functionality of the Speedwell indices coupled with the technology of weatherXchange has produced a great opportunity for users looking to better understand possible structures and prices. Price discovery can be done on weatherXchange, but then Protection Sellers such as Munich Re can work directly with users to provide firm pricing and finalize the transaction.”

Institutional brokers can provide transaction anonymity, assistance with firm pricing, and manage complex structures through weatherXchange.

The company said that recent market trends in renewables have driven multiple transactions based upon these wind power indices.

“Over the past year we have seen a significant trend in the energy / renewables space for the management of supply side weather risk,” Nicholas Ernst, Managing Director of Weather Markets, at broker-dealer ICAP stated. “The Speedwell indices provide for the necessary components of a tradable product, historical data for pricing, daily values for marking your books, and timely / reliable Settlement Data.”

As well as regional wind power indices, Speedwell can also provide custom indices for specific portfolios that can be loaded into weatherXchange and then priced against the market appetite for hedges related to a lack of output.

It’s good to see the weather risk transfer market becoming increasingly sophisticated and technology playing an increasing role in making these important hedging products available with greater transparency to renewable energy industry participants.

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