“Ground-breaking” financial hedge covers hurricane risks

Willis claimed it had closed a “ground-breaking index-based hedge” for US electric generation and retail electricity provider NRG Energy.

“The transaction is designed to offset the potential financial impact to NRG if a hurricane were to affect its business in the Houston area. This innovative risk management vehicle, known as Willis Hurricane Load-Protection, allowed NRG to lower hurricane risk hedging costs by embedding two additional energy variables into the payout formula. Any payout would not require a prolonged claims handling process,” Willis said.

“NRG and Willis partnered to access an unusually wide spectrum of markets: insurance, re-insurance, retrocession, banking, hedge funds and OTC derivatives. The deal term is through October 2009. Other key terms and conditions of the transaction are considered confidential.”