Excessweather launches with £100mn facility

26/09/2014

Excessweather, a new managing general agency that provides indexed weather cover, has launched with an initial maximum line of £100mn, The Insurance Insider can reveal.

Headed by former QBE Re underwriter John Warwick and chaired by ex-Aviva Investors COO John Hodgson, Excessweather is thought to be the first UK-based weather index coverholder.

One of Excessweather’s capacity providers is the insurance-linked securities reinsurance fund ILS Capital, with Warwick saying another five (re)insurers were also committed.

Having obtained Financial Conduct Authority approval, Excessweather will now serve clients such as retailers, events managers, logistics firms, agricultural firms and brokers for worldwide weather insurance policies.

London-based Excessweather uses a product originally developed by weather risk management specialist CelsiusPro in conjunction with Aon Benfield.

Although Aon Benfield is no longer involved, CelsiusPro remains a shareholder of Excessweather, together with ILS Capital.

The company uses data from weather stations across the world to anticipate and price all weather scenarios, including hot, cold, wet, dry, crop and catastrophe (hurricane and earthquake).

As the payments are pre-agreed within the terms of the insurance contract, there should be no room for dispute and a typical payout time would be 14 days, says the company.

Over the next few months, Excessweather will target brokers with the aim of developing a network and helping them to explain the product to their clients.

It also plans to engage in talks with the UK government about the product’s implications for Flood Re, the not-for-profit flood fund that is in the process of being implemented. Warwick said the UK government had “struggled to respond effectively” to the severe flooding seen in 2007 and 2012, and that Excessweather offered a potential solution.

“We want to open up what has until now been a market open to just the biggest broking players to everyone,” Hodgson said.

Hodgson added that this structure also made Excessweather attractive to future investors, as many of the risks and variables were known up front, simplifying the reserving issue.

Insurance Insider – 9th September 2014

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