Launch coverage in the trade media for innovative weather MGA Excessweather Ltd

Launch Coverage: Excessweather Ltd, September 2014

Excessweather launches with £100mn facility (Insurance Insider)

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.

Weather index MGA to target brokers after securing capacity (Post Magazine)

The first UK-flagged weather index coverholder is targeting a range of smaller broking partners after securing underwriting capacity from a panel of market players.

Excess Weather was launched this week to provide a form of insurance and reinsurance that pays out automatically when certain weather events occur.

The company is headed by former QBE Re senior underwriter John Warwick and chaired by ex-Aviva investors chief operating officer John Hodgson. Excess Weather has already secured underwriting capacity to the tune of £100m per risk via a panel of providers including Bermuda-based ILS Capital, with other backers including reinsurers and hedge funds.

Commenting on the launch of the business, Warwick said: "Excess Weather is the first dedicated UK platform to offer clients this product. We use data from weather stations across the globe to anticipate and price all weather scenarios, including hot, cold, wet, dry, crop and catastrophe.

"Our aim over the next few months is to develop a network of brokers and assist them in explaining our products to their clients. We want to open up what has until now been a market open to just the biggest broking players to everyone."

On the concept behind his firm's offering, he added: "Weather is a major driver of corporate profit and loss, but until recently, policyholders have only been offered weather as a standard risk, and faced complex disputes about severity and loss values, which take a long time to resolve.

"Instead, we provide certainty. Paying both premium and claim is a pre-agreed term of the insurance contract, and because the insured event is weather incidence, not the loss, there is no adjusting or dispute. Typically we would pay out within 14 days of a valid loss to a policy"

Warwick explained that the proprietary weather model and products were originally developed by Celsius Pro in Zurich. However, Excess Weather now has the opportunity to broaden distribution into brokers, insurers and reinsurers, as well as corporates.

He said: "We are already in advanced talks with a leading worldwide grape grower and wine producer, and have interest from blue-chip UK retailers, whose profits are highly dependent on seasonal shopping, plus we are also talking to a number of brokers and reinsurers

"[Chief financial officers] know exactly what they get for their money. Pricing is fully transparent and the customer can experiment with different weather conditions, rates of payout, and length of contract to create a tailored trade off of cost and risk. "There are also obvious implications for public policy. The government has struggled to respond effectively to recent weather events such as the severe flooding in 2007 and 2012, and media attention has invariably focused on householders, rather than businesses where the impact of flooding has much more serious consequences for the British economy. Our model offers a potential solution and we would welcome the chance to participate in the policy arena."

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