BNL plans weather desk for Italy
Rome-based Banca Nazionale del Lavoro (BNL) is planning to set up a weather derivatives desk, which could add to the recent thrust of new players in the weather risk market. BNL hopes to establish the desk, specifically for the Italian market, by the last quarter of this year, in preparation for the winter 2002/2003 season.
James Dolby, a London-based structured products manager for BNL, told RiskNews that the firm does not intend to trade speculatively. “Instead, BNL will act as a margin-taking weather risk originator, placing its risk with insurance companies, through alternative risk transfer, or with energy companies,” said Dolby. French bank BNP Paribas, which traded weather derivatives speculatively, became one of the first casualties of the weather risk market when it ceased trading in January.
Although Italy still lags behind Scandinavia, the UK and Germany when it comes to energy deregulation, Dolby said Italian energy firms are interested in using weather derivatives. Other sectors that BNL plans to target include the agricultural community, such as wine and olive oil producers, ski resorts which have suffered from a recent lack of snowfall, and clothing manufacturers. Dolby added that BNL clients may choose to tie weather derivatives with interest rate or foreign exchange deals or other corporate hedging strategies.
But BNL is faced with some problems. “The availability and quality of Italian weather data, which is central to structuring weather derivatives, has so far held back any activity in the Italian weather market,” said Dolby. BNL has yet to decide whether to opt for the meteorological data provided by the official Italian weather service, or the data provided by Italian military weather stations. But it won’t be analysing the data itself. Instead, BNL said it will buy cleaned data from third-party data providers, such as California-based Risk Management Solutions.
Although Dolby said there is a lot of untapped potential in the Italian market, BNL will face competition. Italian bank IntesaBCI has been globally active in the weather derivatives market for the last year, although it is unclear whether it has yet closed any deals in Italy. “As far as I’m concerned the more participants in the weather risk market, the better,” said Richard Turin, IntesaBCI’s New York-based head of structured products. “If more banks get involved, then more corporates will become aware of the benefits weather hedging can provide.”
The most recent entrant to the weather risk market is South Africa’s Gensec Bank. Marsh & McLennan Enterprise Risk, a sister company of New York-based insurance broker Marsh, is also in the process of establishing a weather derivatives desk aimed at enticing corporate end-users into hedging against revenue-threatening weather variations.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
FRTB start dates must align globally, says European Commission
Lawmaker could trigger delay to market risk rules in Europe if US implementation drags on
Fed green lights more capital relief trades
Five US banks authorised to issue repeat credit-linked notes backed by financial guarantees
Basel III endgame: why moving fast might prove better for banks
Republicans are pushing for reproposal, but a rapid finalisation may prove less far-reaching
Isda pushes to ‘decouple’ Simm calibration from model changes
Emir 3.0 prompts effort to separate risk-weight revisions from methodology updates
Basel war on window-dressing may smooth liquidity, at a price
Changes to G-Sib charge could curb year-end repo volatility, but also cut balance sheet capacity
One year on, regulators still want a cure for bank runs
Broad support for higher outflow assumptions on uninsured deposits, but that won’t save insolvent banks
Watchlist and adverse media monitoring solutions 2024: market update and vendor landscape
This Chartis report updates Watchlist monitoring solutions 2022 and focuses on solutions for sanctions (name and transaction) screening and monitoring adverse media and its related elements
Basel Committee reviewing design of liquidity ratios
Focus on LCR and NSFR after Silicon Valley Bank and Credit Suisse, but assumptions may not change
Most read
- Breaking out of the cells: banks’ long goodbye to spreadsheets
- Too soon to say good riddance to banks’ public enemy number one
- Industry calls for major rethink of Basel III rules