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Menlo Park, CA, and
Rockville, MD - June 16, 1999 - Risk Management Solutions (RMS)
and Earth Satellite Corporation (EarthSat) today announced a
strategic alliance to create a range of products and services for
the emerging global weather risk market. The strategic alliance
combines EarthSat's 25 years of experience in providing reliable
weather data and forecast information to the energy and agriculture
industries with RMS' expertise in risk assessment and catastrophe
modeling for the insurance and reinsurance industries.
Working together, RMS and EarthSat plan to provide a combination of
refined historical weather data and advanced analytical tools to
allow clients to accurately quantify weather risk. The partnership
will also be offering daily weather data and forecast information to
support active trading of weather contracts.
Tom Hutton, CEO of RMS, points out "Weather risk is attractive as a
potential new source of premium for insurers and reinsurers since it
has limited correlation with their traditional property portfolios.
However, many of our clients have been hesitant to enter the market
due to the lack of reliable data and techniques for understanding
the underlying risk. Building on an initial weather risk research
and development effort that we launched in mid-1998, our partnership
with EarthSat marks a decision to make a substantial ongoing
investment in the extension of our modeling technology so that we
can provide our existing clients and other participants in this
market with leading-edge capabilities to quantify and manage weather
risk."
EarthSat CEO Doug Hall adds "We believe that the products and
services we will be offering with RMS will be relevant for all
participants in the weather risk market, ranging from individual
corporations analyzing their weather risk to energy companies or
reinsurers who are writing weather contracts. EarthSat has been very
active in providing weather data to support energy and agriculture
commodities trading for many years, and we are excited to be working
in partnership with RMS to address this growing new market."
The weather risk market emerged less than three years ago, but it is
growing rapidly, with recent estimates suggesting that as much as $3
billion of transactions have already been completed. In comparison,
the worldwide volume of catastrophe reinsurance transferred every
year is estimated to be approximately $60 billion. Structured either
as derivatives or as insurance or reinsurance contracts, weather
transactions typically cover local or regional variations in
temperature, precipitation, or other weather features over periods
from one month to more than a year.
"Pricing of temperature and other weather contracts is still in a
price-discovery phase," notes Jeff Porter, Vice President of Weather
Trading at Koch Industries. "As an active participant in the weather
market, we believe that a comprehensive evaluation of weather risk
by an independent organization such as the RMS - EarthSat
partnership will significantly improve the confidence of potential
new participants, which should have a very positive impact on the
overall growth of the market."
Weather contracts were introduced as a tool for utilities and other
energy providers to hedge weather-related fluctuations in demand
following deregulation of the energy markets. In addition to the
increasing use of such contracts by energy companies, the
possibility of hedging weather risk is now appealing to a much
broader array of companies with weather exposure, ranging from
apparel manufacturers to entertainment companies to beverage
producers. As another sign of continuing growth of the weather
market, the Chicago Mercantile Exchange has recently announced plans
to offer the world's first exchange traded temperature-related
derivatives, using EarthSat weather data to settle trades.
About RMS
About RMS Risk Management Solutions (www.riskinc.com)
is the world's leading provider of products and services for the
quantification and management of property catastrophe, natural
hazard, and complex business risks. Its clients include leading
insurers, reinsurers, industrial corporations, governments, and
financial institutions. Founded at Stanford University in 1988, RMS
employs over 500 people worldwide, and has partnerships with leading
companies in corporate risk and risk finance such as Arthur Andersen
and Oliver, Wyman and Company. RMS is owned by DMG Information, a
division of the U.K.-based Daily Mail and General Trust plc media
enterprise.
About EarthSat
About EarthSat Earth Satellite Corporation (www.earthsat.com),
established in 1969, is an international consulting and professional
services firm specializing in the application and development of
remote sensing and geographic information technologies (GIS) to the
exploration, development, monitoring and management of the Earth's
resources. EarthSat's Weather Services Division has been providing
weather services to the agricultural community since 1973, and has
developed a role as a leader in energy weather since 1988. Based in
Rockville, Maryland, EarthSat is a world leader in the utilization
of remote sensing data from aircraft and satellites and is the
largest value-added provider of satellite remotely sensed images.
EarthSat solves information problems in oil and mineral exploration,
worldwide crop monitoring, and landcover change mapping.
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