3 December 2013

Willis and Endurance team up for Australian weather transaction

Willis Group has designed and placed a derivative-based risk transfer solution, backed by Endurance Global Weather, to protect Roy Hill Holdings. Roy Hill, an emerging mining, rail and port venture, is now covered for cyclones and heavy rainfall delaying the construction of what will be the largest single-site iron ore mining operation in Australia.

The two year coverage protects Roy Hill from the impact of a named cyclone passing through the Western Australian area in which the company is currently constructing a 55 million tonne per annum mining, rail and port project. Protection will extend for two cyclone seasons—the period of construction leading up to the mine becoming operational in 2015-- with a total limit of AUD 56 million.

The index-based cover, based on the duration that a cyclone spends in the indemnification zone and the amount of cyclone-related rainfall across three weather stations, does not require that the insured prove any loss or damage to assets.

Julian Roberts of the Willis Global Weather Practice told Bermuda:Re: "in this case the client's requirements were not necessarily determined by physical loss or damage, the typical basis of indemnification for traditional insurance. It was therefore necessary to develop a basis of coverage that better reflected Roy Hill's exposure which is predicated by the occurrence of cyclone events."

Steve Hearn, deputy CEO of Willis Group, commented: “traditional construction and property policies will cover the damage caused by a cyclone, but not the financial impact of project delays and additional wages where there is no damage to the insured assets. This bespoke solution was designed to cover this traditionally uninsurable risk, which Roy Hill identified as a particular concern.”

John Charman, chairman and CEO of Endurance Specialty Holdings, added: “this transformational risk solution is representative of our strong relationship with Willis globally as well as Endurance’s commitment to creating strategic partnerships in the emerging Asia Pacific region. Working closely with Willis, we were able to combine our Global Weather team’s analytic expertise with our long-term capacity and strong balance sheet to execute an innovative structure specific to Roy Hill’s complex and unique risk exposures.”

Roberts concluded: "the Willis Global Weather Practice specialises in developing index-based weather solutions for clients across the widest spectrum of sectors. These solutions are, by their very nature, tailor-made to reflect the specific exposure that each client, in their respective locations, has to weather. Our pipeline reflects a broad range of demand and the need for continuous innovation of weather index-based solutions."