Reinsurance giant sees rising demand from energy sector for weather exposure cover

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, reported Reuters.

Munich Re estimates the annual market at $3-4bn in the US, significantly lower in Australia, more than EUR1bn ($1.1bn) in Europe, and $200-$400m 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.

“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.

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 impact of the vagaries of wind, speeds, heat, cold, solar intensity and precipitation.

Source: Asia Insurance Review