Weather Risk Management Association - PowerPoint PPT Presentation

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Weather Risk Management Association

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  1. Weather Risk Management Association Joe Connor Aquila, Inc. www.wrma.org

  2. WRMA • Trade association whose members specialize in providing solutions to manage exposure to weather risks. • Our members offer weather risk protection in the form of insurance and weather derivatives, to prevent companies from absorbing the financial burden of harsh weather patterns.

  3. GOALS • Develop standard methods of operation and procedures for the weather trading market • Facilitate the growth of a strong and vibrant weather trading industry • Address critical issues that affect the industry • Educate consumers whose businesses are affected by the weather

  4. What is Weather Risk? • Financial gain or loss due to change in weather conditions over a period hours, days, or months.

  5. What is a Weather Derivative? • Risk management tool used to stabilize annual revenues that otherwise may be affected by severe changes in weather (temperature, snowfall, rainfall, wind) • Based on reliable and accurate sources of weather data, e.g., National Oceanic & Atmospheric Administration (NOAA).

  6. Benefits of Weather Derivatives • Stabilize Revenue • Control Pricing and Volume Risk • Enhance financial portfolios • Weather Conditions become an asset rather than a liability

  7. Energy and Utility Agriculture Financial institutions Transportation Entertainment What Industries Use Weather Derivatives?

  8. Who are our members? • Aquila • Element Reinsurance Holdings • Axia Energy • Industrial Bank of Japan • PricewaterhouseCoopers

  9. Geographic Areas Covered

  10. Current Trends • Market Size • 8 Billion

  11. El Nino/La Nina The SOI (Southern Oscillation Index) and the Nino SSTA Indices (Sea Surface Temperature Anomalies) have a high correlation to a variety of global weather impacts. ENSO Indices are used as indicators of the extreme events that are commonly referred to as El Nino and La Nina.

  12. Weather Risk Management Association Valerie Bergman Cooper, CAE Executive Director vcooper@kellenco.com www.wrma.org

  13. Global Climate Impacts of El Nino & La Nina

  14. What is an El Nino? • Normal Year • Warm ocean temperatures north of Australia • Converging winds lead to heavy Precipitation • El Nino Year • Ocean temperatures warm in the Eastern Pacific Ocean • Wind patterns shift eastward • Descending winds lead to very dry conditions over Australia