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| April 7, 2003 |
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| Strengthening
Weather Derivatives Business by Global Alliance |
Mitsui Sumitomo Insurance Co., Ltd. (President Hiroyuki Uemura,
hereinafter "MSI") is pleased to announce that MSI has created
a strategic alliance in the weather derivatives business with GuaranteedWeather
Holding Ltd.(CEO Brian O'Hearne, hereinafter "GW" headquartered
in Bermuda with management services from USA), and launched a globally
evolutive operation since April this year.
MSI sees that this alliance enables the company to not only further
enhance the profitability of its weather derivatives business but
also offer its customers a wide range of weather risk management products
satisfying their various needs in Japan. |
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(1) Conceptual Drawing |
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(2) Alliance Business Flow |
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| (1) |
Marketing and Underwriting activities for weather derivatives
are internationally demarcated between MSI for Japanese/Asian
market, GW for American market and Hannover Reinsurance Company
for European market. |
| (2) |
A The risks assumed by them will then be converged into a
global weather pool managed by GW to create a globally diversified
portfolio. |
| (3) |
The portfolio will be reallocated to each alliance partner. |
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| 2. Advantages out of the Alliance |
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| (1) |
MSI's weather derivatives premiums offered to its customers
can be stabilized and even lowered, as compared with the cases
of focusing its risk-taking simply on Japanese risks, because
of expected exchange and diversification of risks among the
alliance partners. |
| (2) |
Backed by an international integration of the alliance partners'
risk-taking capacity, MSI
would be able to cope with larger risks so that such demands
as from Japanese Power
and Gas sectors may be satisfied. |
| (3) |
Through sharing the techniques behind product development
and risk management among the alliance partners, MSI can offer
weather-related derivatives products which optimize sophisticated
know-how in the international marketplace. |
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| 3. Background of the Alliance |
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| (1) |
In the weather derivatives business, MSI does always pride
itself on the highest performance as the frontier since the
first-ever deal in June 1999 as well as the first launch of
sales through a regional bank's intermediary it implemented
in Japan. The recent completion of its integrated weather derivatives-specific
systems for a comprehensive use including weather data processing,
analysis and evaluation of risks and transactional administration
also indicates the fact that it has led this market from the
aspects of a high-tech know-how and operational skills. |
| (2) |
On the other hand, GW is a weather derivatives-purpose company
incorporated by Ramsey Quantitative Systems Inc.(CEO Neil Ramsey,
based in Louisville, Kentucky), a US investment management company.
GW, which took over the employees, IT& the systems, the
brand, the mode of operation and so on from Aquila which used
to be one of the world top players in the weather derivatives
arena, has entered the US weather derivatives market primarily
as a major market maker since this April. |
| (3) |
MSI's alliance with GW has been decided because expectations
of a global business evolvement, weather risk management methodology
etc. were found in good agreement with each other. This alliance
is believed to further strengthen MSI's competitiveness on a
global basis. |
| (4) |
The size of the global weather derivatives market today is
said to amount approximately to $ 10 billions on aggregate notional
amounts basis. But the market has rather faced a sluggish growth
due to the reduction or withdrawal of the business by larger
US energy merchants who were the major players in the weather
derivatives. Entrance to the weather derivatives market and
the alliance with MSI by GW are expected to bring additional
expansion and activation to the global weather derivatives market. |
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