eAcumen launches weather risk platform

San Francisco-based risk technology firm, eAcumen, has launched the core module of WeatherBook, a quantitative weather risk management platform that prices weather derivatives and simulated portfolios using a proprietary simulation algorithm.

eAcumen said WeatherBook effectively captures the multiple scales of variability in climate data, as well as the complex inter-relationships between multiple contracts in its simulation engine, providing a major step forward in simulating the risk-adjusted returns on weather derivatives and most profitably managing portfolios of weather-related risk.

"Weather derivatives offer tremendous hedging and operational value to energy and agricultural companies, as well as any company exposed to weather-related earnings fluctuations," said Geoffrey Considine, vice-president of weather and risk analytics at e-Acumen. "Until now, it has been difficult to accurately quantify the benefits of weather derivatives and their associated risks. WeatherBook combines accuracy and ease of use in a single package that represents a significant advancement in the trading and use of weather derivatives."

WeatherBook can be used to price and manage many types of weather risk, such as contracts on degree-days, streamflow, precipitation, temperature, or other less common indexes. WeatherBook's cross-commodity capabilities also allows companies exposed to weather risk that also trade commodities such as natural gas or power, to better understand the complex relationships between weather derivatives and other commodities, interest rates, cash positions, and other portfolio variables. WeatherBook uses historical temperature data sets for 200 US cities to provide traders and risk managers with the ability to structure derivatives.

And in a related announcement California-based Risk Management Solutions (RMS) has said that it has upgraded its tornado and hail risk models for North America, thereby allowing insurance companies and weather derivatives traders to manage weather risk more effectively.

But news of product launches and model upgrades follows from last month’s weather risk casualty – Weather Risk Advisory (WRA). The UK-based software consultant, which provided weather derivatives trading platforms, has closed due to a lack of funds, having only managed to secure £1 million through venture capital of the £3 million it initially set as its target in September 1999. Jurgen Gaiser-Porter, former WRA research head, has joined Enron’s weather desk, and former WRA chief executive Peter Brewer is planning to establish a weather desk with an as-yet unnamed firm.