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News
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WRMA 2003 Annual Survey Finds Use of Weather
Contracts Triples |
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* Growth Among
End-Users in Europe, Asia;
Surge in Exchange-Based Contracts
* Use of Rain and Wind-Related Contracts Also Increases |
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MIAMI, FL June 5 -- The Weather Risk
Management Association (WRMA), the international trade organization
of the weather risk management industry, announced a near tripling
in the number of weather risk management contracts transacted from
April 2002 through March 2003 compared to the previous 12 months,
according to its 2003 annual industry survey.
The number of weather risk management contracts purchased grew at an
unprecedented rate, with 11,756 contracts transacted during the
survey period. The notional value of these contracts, reported at
nearly $4.2 billion, varied slightly from the previous year. This
indicates a surge in smaller contracts and a broader spectrum of
users. Last year's survey recorded 3,937 contracts with a notational
value of $4.3 billion.
Weather risk management futures and options traded on the Chicago
Mercantile Exchange (CME) totaled 7,239 while over-the-counter risk
transfers totaled 4,517. Over-the-counter contracts climbed 14
percent from the 2002 survey. Very few trades in weather risk
management instruments occurred through the CME during the previous
survey period.
"The growth in volume of weather risk management contracts
demonstrates that these instruments are increasingly becoming
essential tools in a company's risk management portfolio," said
Lynda Clemmons, President of WRMA. "In less than six years, the
industry has generated business of more than $15.8 billion. During
the past year, the number of contract transactions in Europe and
Asia nearly doubled in each region."
The European market recorded a total of 1,480 contracts compared to
765 contracts measured in the 2002 survey, an increase of more than
90 percent. In Asia, 815 contracts were completed, an increase of
nearly 85 percent, compared with 445 contracts in the 2002 survey.
The North American market remains the industry's largest, with the
number of contracts totaling 2,217, a decline of 20 percent over the
previous year's 2,712 contracts.
"It is a real testament to the strength of the industry that the
weather risk management market maintained its momentum, continued to
diversify and expanded in key geographic regions and markets during
the past year. This occurred despite a challenging economy and
significant consolidation in the U.S. energy trading business, where
the industry had its genesis," said Valerie Cooper, Executive
Director of WRMA. "The growth we've seen in Europe and Asia
demonstrates the power of these instruments in hedging against
weather risk."
The diversification of the types of contracts utilized is another
significant development. While temperature-related protection (for
heat and cold) continues to be the most prevalent, comprising more
than 85 percent of all contracts compared to nearly 90 percent in
the 2002 survey, there were substantial increases in the use of
rain-related and wind-related contracts. In the 2003 survey,
rain-related contracts account for 8.6 percent of the market
compared with 6.9 percent in 2002; wind for 1.6 percent compared
with 0.3 percent; and snow for 2.1 percent compared with 2.2
percent.
"The U.S. Department of Commerce estimates that nearly one-third of
the U.S. economy, or $3.5 trillion, is at risk due to the weather.
Our 2003 survey demonstrates that companies throughout the world
understand the magnitude of this risk and are increasingly using
these tools to manage it," Ms. Clemmons said. "As a result, we are
very optimistic about the future of the weather risk management
industry."
WRMA employs PricewaterhouseCoopers to conduct this survey to ensure
that an independent third-party compiles data on the industry.
About the Weather Risk Management Association
Founded in 1999 by some of the leading companies in the industry,
the Weather Risk Management Association (WRMA) is an international
trade organization dedicated to promoting the industry both to those
within it and to end-users. The industry began in 1997, offering
companies the opportunity to control their financial exposure to
weather conditions. As a part of its mission, WRMA initiates surveys
of the industry, advocates the standardization of contracts and
other documentation used for transactions and sponsors forums and
conferences around the world for members to meet and discuss a range
of topics such as international markets, data collection issues and
tax and legal matters.
SOURCE Weather Risk Management Association
/CONTACT: Bob Conrad, +1-202-466-7391, ext. 1123, bconrad@pcgpr.com,
cell: +1-703-980-0997, or Nicholas Mahrt, +1-202-466-7391, ext.
1103, cell:
+1-703-944-7468, nmahrt@pcgpr.com, both of Potomac Communications
Group, for
the Weather Risk Management Association/
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