Mild winter insurance
Temperature volatility is a financial risk for energy suppliers as electricity and gas sales decrease during a mild winter due to a decline in the use of heating appliances.
For these types of companies, sales and therefore turnover is directly correlated to temperature.
AXA Climate provides parametric insurance that is structured using using a Heating Degree Day (HDD) index.
It represents the end value of the daily temperature and the reference temperature chosen together with the client.
The claims process is transparent using third-party weather data allowing to mitigate the financial consequences of weather-related effects.
How does it work?
1
We structure your coverage with a cumulative HDD index during the risk period (e.g. 1st November – 31st March) and let you choose the threshold depending on your risk appetite
2
We monitor the index using the independent data from weather stations and if the predefined threshold is met…
3
…You receive the payout within a few days after the end of the risk period
When to contact us?
Contact us up until two months before the start of a heating season
Data we will need from you:
- Historical losses
- Location
Example
Parametric cover for a Gas provider
CLIENT NEED
A gas provider is looking for a risk transfer solution against mild temperatures in winter that could lead to a drop in gas consumption and consequently decreased revenue for the client.
OUR SOLUTION
MILD WINTER Protection financially secures the income of gas suppliers against consumers’ low demand that is directly correlated to outside temperatures. Together with the client we predefine the threshold and the exit and agree on a payout amount per each HDD below the threshold.
THE RESULT
In 2001 and 2016, the outside temperatures were significantly warmer than usual leading to a decrease in gas consumption. As a result, the company received 48% and 76% of the Sum Insured respectively from AXA Climate.
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