Summary
This document is a technical report detailing innovative weather risk transfer solutions offered by Munich Re, specifically designed for various industry sectors. It outlines how these bespoke market-based solutions compensate clients for weather-related losses when actual weather outcomes deviate from established ranges. The report identifies challenges faced by businesses, such as adverse weather impacting performance and the need to protect portfolios against price and volume risks. A use case involving a gas retail company in the UK illustrates the application of these solutions, particularly the quanto hedging tool that addresses both price and volume risks. The report explains the structure of a four-quadrant quanto, which provides payouts in various adverse conditions, and presents specific parameters such as risk periods and notional values. Additionally, it describes the selection of relevant weather indices and commodities to effectively replicate client portfolios, emphasizing the tailored nature of the offerings.
