Willis creates product to cut hurricane hedging costs

NRG Energy, a US-based utility, has closed an innovative index-based hedge with global insurance broker Willis designed to cut the cost of hedging against hurricane risk.

The transaction, completed on September 8, was structured to offset the potential costs to NRG if a hurricane were to affect its business in the Houston, Texas area. Called the Willis Hurricane Load-Protection, the product allows NRG to lower hurricane risk hedging costs by adding two energy variables into the payout formula. It also guarantees any payout would not require a prolonged claims-handling process.

The deal term is through October 2009. Other key terms and conditions of the