Swiss Re teams with CelsiusPro to offer weather derivative contracts to small and medium-sized companies.
Swiss Re has formed a partnership with Zurich-based CelsiusPro to offer weather derivative contracts.
CelsiusPro's online sales platform at www.CelsiusPro.com is targeted at small and medium-sized European companies. Until now weather derivatives have mostly been used by large companies.
Marcel Stäheli, Swiss Re's Head of Weather & Energy Underwriting, said: “Swiss Re has pioneered numerous new products and novel approaches to managing the risks of climate change. Through this partnership with CelsiusPro, Swiss Re fosters market growth and access to weather risk management for a new client segment.”
Mark Rüegg, CEO of CelsiusPro, added: “We realise that companies are becoming more aware of their financial exposure to the effects of climate change and adverse weather. We are delighted to provide a transparent and easy to use risk management tool with an online price discovery and execution platform. Swiss Re is our ideal partner, combining vast experience in weather risk management with a very strong balance sheet.”
More than two thirds of the European economy is directly or indirectly dependent on atmospheric conditions, according to SwissRe. Companies may be interested in protecting themselves against the financial consequences of unfavourable weather conditions by purchasing weather risk transfer products based on parametric triggers. These provide compensation for loss of revenue or additional costs.
The utility and energy sector, for example, is at the mercy of the weather with average energy consumption reduced by falling demand for heating in a mild winter and for air-conditioning in a cool summer. Other industries exposed to weather-related earnings volatility include agriculture, construction, travel and leisure, retail and wholesale, transportation and events.
A weather derivative is an option based on temperature and/or precipitation. The option is based on weather data, measured by independent national weather stations across Europe. The key parameters are: Weather data (temperature, rain, snow), time frame (minimum 3 days, maximal 365 days), amount (e.g. x mm rain) payout conditions and maximum payout.