Lane said Centrica – an active participant in the weather markets that trades tens of million of pounds of weather contracts per year – had sought such a multi-year deal for the past two years, but the market, until now, had been unable to meet the company’s pricing terms.
He added that while Centrica had considered weather hedging by stripping out elements of other weather-dependent derivatives contracts, the company believed it was cheaper to use the weather markets directly.
No broker intermediary was involved in the deal. Trigger temperatures will be based on those monitored at a meteorological centre at London’s Heathrow Airport.
The week on Risk.net, March 10-16 2018Receive this by email