Canadian Underwriter

Reinsurers partner on weather trades

February 1, 1999   by Canadian Underwriter

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New York-based Worldwide Weather Trading (WWT), a trading company dealing exclusively in weather hedges, has announced agreements with 10 reinsurers to underwrite its trading risk. With the announcement, the company unveiled its new trading offices in New York, facilitating full-scale trading operations.

WWT, along with reinsurers such as Hannover Re and Zurich Re, are among the first companies to enter weather hedge and derivative trading. Most current providers are sidebar operations of major energy companies who exist largely to handle their own weather risk. The company will serve speculative investors and reinsurers looking to offset weather-related liability risk.

“The unusual global weather conditions of last year triggered by El Nino has drawn more attention than ever to the weather as an economic determinant of business success,” says Bruce Silverstein, WWT managing director. “In just the last year, weather hedges have moved from a novelty into the financial mainstream.”

Weather hedges and derivatives are trades with an agreed amount payable at a certain time based on the occurrence of a defined weather condition. They are currently utilized in weather-affected industries ranging from energy producers to amusement parks.

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