Swiss Re Corporate Solutions wins 2016's Deals of the year award for a wind hedge in Australia

For the second year in a row, Swiss Re Corporate Solutions' weather risk management expertise is recognized in Environmental Finance rankings.

We were recently in contact with an energy multinational, which wanted to optimise its fronting arrangements. This gave us the opportunity to support the company in operating effectively through its captive insurer backed by our financial strength.

It was an involved process to design the right solution for this client as the usual regulatory, tax and compliance issues were multiplied by the number of countries in which the company is present. In addition, we had to work closely with the captive to analyse such factors as risk mitigation measures and exposure levels (particularly for high-impact risks).

Ultimately, it was this preparation that made our offer stand out. We closed a deal for a one-year fronting arrangement with customised cover for property, business interruption and third-party liability risks across several countries. As a result, the client was able to benefit from an integrated, multi-line package, thus reducing the complexity of its insurance portfolio. In addition, we adapted our fronting capacity to suit the client’s specific risk exposure, which gave them a better deal than an off-the-shelf solution.

Fronting is quite a common practice in insurance. It allows companies to retain their own risks, while at the same time meeting their regulatory requirements and clients' demands through the backing of an external partner.

At Swiss Re Corporate Solutions, we apply our industry expertise and strong financial base to allow our clients to enjoy our support in the most efficient way we can provide it. We do that by ensuring our clients can maximise the cost-to-benefit ratio of their insurance captive, in addition to fronting for the large claims. The company received 2016's Deals of the Year award in the Weather Risk Management category for a wind hedge in Australia.

Working with Sydney-based Infigen Energy, the largest owner of wind energy capacity in Australia, Swiss Re Corporate Solutions' team developed a product that hedges Infigen’s entire 557MW Australian portfolio of six wind farms against weak wind conditions.

It is the first hedge of its kind, as it is based on actual energy production across multiple sites, in South Australia, New South Wales and Western Australia. Traditional wind hedges are tied to single sites and are based on modelled wind speed indexes.

Last year Environmental Finance recognised the company for its solar hedge for photovoltaic power plants in China.

Juerg Trueb, Head of Environmental & Commodity Markets, commented: "It is notable that we continue to receive recognition for our deals in the world's most dynamic renewable energy markets. We are pleased to maintain our leading position in the area of weather risk management and to offer some of the most innovative solutions to our global clients."

Stuart Brown, Head Origination Weather & Energy Asia Pacific-EMEA, added: "Deals like this one are front and center in our strategy to take weather risk out of renewable generation in ways that add value to participants in the business. It's an honor to be recognised as an industry pathfinder with such an award."

In an interview with Environmental Finance, Jamie Summons, Originator Weather and Energy, outlined some specifics of the deal and mentioned: "It's never been done before anywhere. It took some time to design, but it was important to get it right."

Environmental & Commodity Markets (ECM), Corporate Solutions' unit specialises in weather risks, offers tailor-made products to protect against weather-related risks across a broad range of industries, such as agriculture, construction, energy, retail and tourism. With its growing footprint (in 2015, Johannesburg and Shanghai were added to the list of offices with weather professionals on the ground) and highly sought-after expertise, ECM has the ability to offer solutions for temperature, rainfall and wind, often with commodity price based settlement.  

Environmental Finance is a global online news and analysis service reporting on sustainable investing opportunities and environmental issues. Its annual "Deals of the year" award recognises excellence in the application of capital markets know-how to addressing the world's environmental problems.