Munich Re targets growing global energy weather hedges

ESSEN, Germany (Reuters) – Munich Re is seeing growing demand for weather exposure protection from energy companies and their customers as they roll out more renewable energy installations, which are prone to fluctuations. Munich Re estimates the annual market at $3-4 billion in the U.S., significantly lower in Australia, more than 1 billion euros in Europe, and $200-$400 million in Latin America, said Rupert Wimmer, senior originator at its Swiss subsidiary New Re. “The insured risk volume in the weather market for reinsurers increases by around 5% to 10% each year,” he told Reuters during this week’s E-World trade fair. “The main drivers are the rise of renewable energy in the electricity generation mix, and thus the necessity to take cover against volatile production and volatile power prices,” he said, adding that New Re expects new customers to come from Britain, continental Europe, Australia and Latin America. Munich Re competes with Swiss Re, Allianz and Japan’s Sompo in a market where policy prices are individualised and there is little public data. Typical products are call or put options and weather swaps, which allow commodities sales or purchases volumes at relatively fixed margins. Operators can use these products to limit the… continue reading

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