“The weather market is at a critical point," said Andrew Ertel, president and chief executive of Evolution Markets. "It has shown significant growth and there is a wide array of derivatives products. However, there has been a reshuffling of the major players and a new set of end-users is starting to embrace weather derivatives for risk management.”
A survey released by consultants PricewaterhouseCoopers and industry body the Weather Risk Management Association (WRMA) in June found that 4,000 weather derivatives contracts, with a notional value exceeding $4.3 billion, were traded worldwide in 2001, a significant increase from the previous year.
But a number of US energy majors have scaled back their activities in the weather markets in recent months, as the fallout from Enron’s bankruptcy continues to disrupt that industry.
Evolution Markets brokered what it claimed was the first weather deal, a heating degree day swap between energy majors Koch Energy and Enron, in 1996.