Temperature volatility represents a financial risk for energy suppliers, who sell much less electricity and gas than during a cold year due to a decline in use of heating appliances. As a result, the companies see their turnover vary with the temperature, because their sales are directly correlated to it.

AXA Climate provides parametric insurance and derivatives that are structured using the 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 thirdparty weather data allowing to mitigate the financial consequences of climate-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.

1

We structure your coverage with Regional Yield Index and predefine the threshold below the five-year average

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

Case study

Example of a parametric cover for a Gas provider

Client need

A gas provider is looking for a risk transferring 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, 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.