Capital Risk signs with Longitude to offer weather products

New York-based weather risk specialist, Capital Risk, has teamed with Longitude, a developer of financial technology to facilitate new derivatives markets, to develop weather risk management products.

The products will be based on Longitude's Parimutuel Digital Call Auction technology (PDCA). Longitude says this allows dealers to offer new derivatives and risk management products on unusual underlyings like national income statistics without having to bear unhedgeable exposures. Longitude has also signed JP Morgan Chase and Deutsche Bank as clients.

"Longitude's PDCA technology is an ideal solution for the weather markets," said Stuart Mercer, chief executive of Capital Risk, a joint venture formed by US venture capital firm The Blackstone Group and UK risk management firm Jardine Lloyd Thompson in May 2000. Capital Risk structures and transactions using insurance and capital markets products.

"Lack of liquidity has limited the development of weather derivatives, and we see enormous potential for PDCA technology to address the unique needs of weather risk management," he added.

Longitude was recently issued a patent for some of the systems used in its PDCA technology.