Five reinsurance companies that invested in troubled energy company Aquila’s weather business, which closed earlier this month, are likely to retain their partnerships with the old weather trading team headed by Ravi Nathan, former chairman of the Weather Risk Management Association.“Hiscox, Mitsui Sumitomo, Kemper, Hanover Re and American Re have all expressed an interest in continuing to work with us,” Nathan told RiskNews.
Ex-Aquila weather traders have sought a new backer, following the closure of the company’s energy trading business earlier this month. The 18-strong team, which comprises traders, IT and back-office staff, is in talks with hedge funds, banks and reinsurance companies interested in establishing a weather derivatives desk, said Nathan.
Aquila had reached an agreement with Chicago-based hedge fund Citadel Investment Group to provide Aquila traders with potential career opportunities. Nathan confirmed he has approached Citadel, but declined to name any other interested parties.
Aquila’s weather desk has also partnered with Gensec Bank in South Africa, the International Finance Corporation (IFC) – the World Bank’s private sector arm – and Agroasemex, a Mexican government-owned insurance company specialising in agriculture and livestock during the past year. All three organisations relied on Aquila to provide them with the weather risk market know-how necessary for establishing weather risk desks. “We are planning to sever these relationships then reconnect them once we find a new company to work for,” Nathan said.
Aquila was thought to have commanded a 30% share of the weather derivatives market, having picked up a lot of business after Enron, a weather derivatives pioneer, filed for bankruptcy. “Aquila’s departure may have affected liquidity in the secondary market but the primary market is still robust,” Nathan claimed.
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