Weather Risk Management

Weather risk is the occurrence of an observable weather event or variability in a measurable weather index that causes losses either to profits (lost revenue and/or higher expenses) or property.

Weather risk management products packaged as either reinsurance or derivatives are settled using the same index that has been determined to cause such losses, and reduce weather risk by providing payouts to offset the financial impact of adverse weather.

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Contingent Risk Management

Adverse events cause unexpected commodity price exposure. Such exposure, called Contingent Risk, creates the energy industry’s most difficult hedging challenges. For example:

• Forced Outages: Outages at a power station force generators to procure expensive replacement energy, or
• Variable Loads: Unusually low temperatures compel an LDC to buy additional natural gas in the market.

Contingent risks can be financially devastating. And, the risks are hard to manage with traditional market instruments.

Contingent risk management products address your unique risk drivers. The products deliver protection if, and only if, adverse events occur. Accordingly, they hedge contingent risk better at a lower cost.