Ghosh added that MMC already has five possible end-user deals on its books, including one with a major retailer.
One of the main criticisms of the weather risk market, worth around $7.5 billion, is that it has failed to attract corporate end-users. But Ghosh said MMC's platform could help change this. “The problem with the market, as it stands, is that everyone talks a lot about potentially interesting deals, but very few firms actually execute contracts. At the end of the day there is a wealth of opportunity that has not been realised,” said Ghosh.
He added that energy firms that trade weather derivatives typically do well in the utility sector but are unlikely to gain the ear of a chief financial officer at a non-energy corporate.”
Ghosh oversaw the first ever weather derivatives contract, for a construction company, while at Enron. Florida-based Grubbs Construction bought a precipitation-linked contract designed to pay out if rainfall levels caused the company to temporarily stop working on its landfill project.
Although Enron once had a 40% share of the weather risk market, Ghosh said the firm’s demise will not adversely affect growth: “There is an ever-increasing demand for weather risk products, and Enron’s exit simply means there is now room for more players in the market. Besides MMC, I am aware of three other dealers who are looking to enter the market.”
In his new role at MMC, Ghosh reports to Jamshid Ehsani, president and chief executive of MMC Enterprise Risk.
The week on Risk.net, July 7-13, 2018Receive this by email